Centre to pay MTNL's bond interest by Wednesday, says DoT officials

The government will come to the rescue of cash-strapped Mahanagar Telephone Nigam Ltd (MTNL) and ensure that its bondholders are paid the interest guaranteed to them, officials at the department of telecommunications (DoT) said.

The officials said that the government will deposit the necessary funds by Wednesday.

In July 2023, MTNL had raised Rs 2,480 crore ($296.97 million) through 10-year sovereign-guaranteed bonds at a semi-annual coupon rate of 7.59 per cent. While the latest interest payment is due on July 20, the financially beleaguered PSU last week informed the exchanges it was unable to make interest payments due to insufficient funds.

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

With this date having been passed, the government now has to step in and deposit the necessary funds in the designated trust and retention account at least three days before the due date, officials said.

“This would be Wednesday, and the funds are expected to be sent by then,” he added.

Losses made by the struggling telco have continued to balloon.

In FY24 (2023-24), MTNL reported a loss to Rs 3302.19 crore, up from Rs 2910.74 crore in FY23. The annual revenue from operations declined by 15.44 per cent to Rs 728.47 crore in FY24, down from Rs 861.57 crore in FY23. Meanwhile, the outstanding debt increased to Rs 25,794.96 crore, up from Rs 23,499.69 crore a year ago.

Set up in 1986, the public sector undertaking (PSU) under the Ministry of Communications was tasked with providing telephone services in the Delhi and Mumbai circles. The company had stayed profitable till 2008-09. Since then, it made losses every year barring 2013-14.