MTNL shares spurt 6% after Care Ratings upgrades long-term debt rating

Shares of  Mahanagar Telephone Nigam Limited (MTNL) rallied up to 6.34 per cent at 58.49 per share on the BSE in Wednesday’s intraday deals. MTNL share price surged after the domestic credit rating agency CARE Ratings upgraded its long-term debt instruments (bonds issue) of MTNL to ‘CARE AAA’, and simultaneously removed the rating watch with negative implications and assigned a ‘Stable’ outlook.

 

CARE Ratings stated that the positive action follows a sustained track record of timely fund infusion by Government of India (GoI) in accordance with the stipulated T-structure payment mechanism (SPM).

 

“Rating assigned to long-term debt instruments [bonds issue] of MTNL principally rely on credit enhancement (CE) in the form of an unconditional and irrevocable pre-default guarantee from the Government of India (GoI), through the Department of Telecommunications (DoT), Ministry of Communications (MoC). The rating also takes comfort from the presence of SPM monitored by a third-party trustee,” CARE Ratings said in a statement. 

 

On December 11, 2024, MTNL informed the bourses that it had defaulted on a semi-annual interest payment of 6.85 per cent for the MTNL Bond Series VI. The interest payment had to be paid 10 days before its due date of December 21, 2024. 

 

However, it stated that in case of any defaults, sovereign guarantee will be invoked by the debenture trustee and the Govt of India is obliged to make the payment to MTNL for the interest or the principal amount.

 

The loss-making telecom company MTNL reported a net loss of Rs 890.3 crore for the second quarter ending September 30, 2023. This compares to a net loss of Rs 773.5 crore in the previous quarter (April-June). 

 

During the second quarter, the company's total revenue declined by 5.3 per cent, reaching Rs 174.2 crore, down from Rs 183.9 crore in the same period last year. At the operating level, the Ebitda loss stood at Rs 119.3 crore for the quarter, compared to a loss of Rs 110.9 crore in the preceding June quarter.

 

The company has a total market capitalization of Rs 3,612.42 crore. At 10:37 PM; the shares of the company were trading 4.02 per cent higher at Rs 57.21 a piece. By comparison, the BSE Sensex was down 0.29 per cent at 80,451.10 level.