Govt to pay MTNL's bond interest payment again, say DoT officials

But the government is unwilling to pay for loans taken by MTNL, say sources

The government will again step in and pay for state-run telecom operator Mahanagar Telephone Nigam Limited’s (MTNL) upcoming interest payment on bonds issued by it, officials from the Department of Telecommu­nications (DoT) have said.

The latest tranche of the interest is up for payment on September 24. Over the weekend, MTNL informed the exchanges it is unable to pay the interest amount owing to insufficient funds.
 

The officials said the government will deposit the necessary funds for the third semi-annual interest (7.75 per cent) on certain bonds later this week. This will be the second consecutive incidence of the government paying interests on MTNL bonds after having done so in July this year. 
 

In July 2023, cash-strapped MTNL had raised Rs 2,480 crore ($296.97 million) through 10-year sovereign-guaranteed bonds. 

The tripartite agreement (TPA) signed between MTNL, DoT and Beacon Trusteeship Ltd, which is the debenture trustee, mandates that MTNL fund the semi-annual interest into the escrow account with adequate funds 10 days before the due dates. 

Given the company’s lack of funds, the government will have to deposit the necessary funds in the designated trust and retention account at least three days before the due date or on September 21.

MTNL has multiple upcoming interest payments for bonds. The company has sought Rs 1,151.65 crore to meet the payment of interest on Sovereign Guarantee Bonds (SGBs) for financial year 2025 (FY25), the DoT informed Parliament in August.

However, according to data compiled by Bloomberg, the telco has to cough up Rs 4,620 crore worth of interest and principal repayments due on bonds guaranteed by the government that are due in FY25. Meanwhile, the government had in the latest Budget proposed to allocate Rs 3,668.97 crore for the payment of the principal amount of MTNL bonds.

MTNL has made losses every year since 2008-09, barring 2013-14. In FY24, MTNL reported a loss of Rs 3302.19 crore, up from Rs 2910.74 crore in FY23.