Banks open to MTNL debt restructuring, reject possibility of haircut

Bankers to state-run Mahanagar Telephone Nigam Ltd (MTNL) have ruled out any haircut but say they are open to debt restructuring, including conversion of debt into equity, or monetisation of the telecom operator’s assets.

 

Cabinet Secretary TV Somanathan has called a meeting of various stakeholders next week to find a way out for the state-run MTNL, which has defaulted on bank loans.  

 

Bankers said during the meeting they would seek assurance from the Centre to repay dues and details on MTNL assets, which can be monetised. As a last resort, bankers may demand legal remedy to clear the dues.

 

“We will be sticking to our stance of not accepting any haircut in the MTNL loan. We are ready to explore other options such as restructuring plans, debt-to-equity conversion but no possibility of haircut. The main agenda for the meeting would be seeking the government’s assurance to clear MTNL dues and information on various other deals of MTNL. This includes its partnership with National Building Construction Corporation (NBCC),” said a senior banking official with a large public sector bank (PSB). 

 

Bankers had flagged the MTNL matter at their last meeting in May with finance ministry officials and sought immediate resolution of the loan defaults.

 

“The main agenda would be to explore options to get the money back. Most banks have declared it as non-performing asset (NPA), but there is no possibility of taking a haircut on the account. Lenders try to make recoveries from even small accounts and taking a haircut on government undertaking does not look good. The discussions on how to recover these funds have been going on for a year now. But this is the first time we will be meeting the Cabinet secretary,” said another official from a public sector bank. 

 

Banks have already classified it as NPA, and have provided a 100 per cent provision against it, said senior banking officials.

 

PSBs have an exposure of over ₹8,000 crore to the state-owned telecom firm, with the loans turning into NPAs.

 

The seven PSBs with exposure to MTNL are Union Bank of India (₹3,543 crore), Indian Overseas Bank (₹2,319 crore), Bank of India (₹1,053.8 crore), Punjab National Bank (₹454 crore), State Bank of India (₹337 crore), UCO Bank (₹260 crore), and Punjab & Sind Bank (₹176 crore). MTNL defaulted on these loans last year.

 

The state-run telecom company has defaulted on ₹8,346 crore in loan repayments to multiple banks, as of April 30.

 

Of the total amount, ₹7,794 crore is outstanding principal and ₹552 crore in overdue interest and penal changes. The company had defaulted during June and August 2024.

 

 In Q4 (January-March) of FY25, MTNL reported a net loss of ₹827.22 crore, widening from a net loss of ₹783.74 crore in Q4 FY24. It also recorded a lower total income of ₹310.72 crore in Q4 from ₹353.54 crore in the year-ago period.

 

For the full financial year of FY25, the state owned telco's net loss widened to ₹3,327.69 crore, slightly up from a net loss of ₹3,267.52 crore in FY24. Total income stood at ₹1,378.52 crore from ₹1,373.10 crore.