MTNL soars 9% as co plans 'not to shut shop' or go to NCLT, say reports

The government plans to keep MTNL as a 'going concern' as the company going to NCLT will not set the right precedent for other PSU companies

Mahanagar Telephone Nigam Limited (MTNL) shares gained as much as 9 per cent in Monday's trade on BSE, recording an intraday high at Rs 55.36 per share.

The buying interest in the stock came after CNBC TV18 reported that MTNL will not be allowed to 'shut shop', while an option to take the company to the National Company Law Tribunal (NCLT) for insolvency proceedings has been ruled out by the company's creditors and the government, which is the majority shareholder of the company, at 56.25 per cent. 

At around 1:16 PM, MTNL share price was up 6.72 per cent at Rs 54.35 per share. In comparison, the BSE Sensex was up 0.65 per cent at 81,911.78 around the same time. The market capitalisation of the company stood at Rs 3,413.34 crore around the same time.

As per CNBC TV18, the government plans to keep MTNL as a 'going concern' as the company going to NCLT will not set the right precedent for other public sector utility (PSU) companies. 

Further, a committee of central government secretaries has been formed to build a plan for the revival of MTNL. Fund infusion of nearly Rs 8,000 crore may be needed in the long term for MTNL to survive, according to the report. 

The cash strapped telecom company has defaulted on the principal and interest payments of its debt facilities availed from many banks.

MTNL, in an exchange filing on October 8, said it owes Rs 87.09 crore to Bank of Baroda, Rs 52.50 crore to Punjab and Sindh Bank, Rs 109.37 crore to Punjab National Bank, Rs 313.90 crore to State Bank of India (SBI), Rs 37.5 crore to UCO Bank, and Rs 337.81 crore to Union Bank of India in terms of principal.

Overall, MTNL owes Rs 938.17 crore in principal to the above-listed banks, and Rs 183.88 crore in interest to all of them. In total, the company owes Rs 1,122.05 crore to the banks. 

However, total indebtedness of the company stands at Rs 32,046.88 crore, including bank loans worth Rs 7,975.89 crore, and Sovereign Guaranteed Bonds worth Rs 24,070.99 crore.

In the past one year, shares of MTNL have gained 82 per cent, compared to the BSE Sensex's rise of 23 per cent during the same period.