MTNL stock skyrockets 19% to multi-year high as govt deposits Rs 92 crore to pay bond interest dues

MTNL has made the requisite payment due to be paid to its bondholders later this week, the state-run telecom operator informed the exchanges.

Shares of Mahanagar Telephone Nigam Limited (MTNL) skyrocketed 19 percent to hit a multi-year high at Rs 63.32 on NSE amid heavy volumes. The shrap rally comes after the government deposited Rs 92 crore to clear immediate bond interest dues of the state-owned telecom service provider.

Earlier this month on July 11, MTNL disclosed that it could not fund the escrow account for the payment of semi-annual interest on the series VIII-A bonds due to insufficient funds.

The payment of the bonds is due on July 20, and as per the structured payment mechanism, the designated trust and retention account is to be funded by MTNL, 10 calendar days i.e. (T-10) before the due date, to the tune of the interest and/or principal obligations on the bonds.

On July 15, Bloomberg reported that MTNL had fallen short of funds to honor its debt due later this week. MTNL has local bonds worth Rs 4,810 crore or $576 million to service for the rest of 2024.

The state-run telco could not pay interest on its 7.59 percent July 2033 bonds, which are guaranteed by the government. Interest payments on 14 bonds are due between July and December this year.

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Following this, reports surfaced that the Union Government will honour all interest obligations/payments for MTNL's bonds. Sources privy to the matter told CNBC-TV18 that the government will honour its commitments on sovereign guarantees given for MTNL bonds and will pay whenever the sovereign guarantee is invoked on MTNL's bonds.

However, they further said that the government has no plans to provide any form of direct financial assistance to MTNL.

A media report also recently stated that "the government is considering the option of handing over operations of MTNL to BSNL." Following the report, both BSE and NSE sought clarification from the state-owned telecom operator.

The Delhi-based telco, in response, said, "MTNL has not disseminated any such information as published in newspaper nor in a position to confirm or deny as no such concrete information/decision is there with MTNL. As such no comment on material impact of this article can be given."

It also said, "There is no such circulated information for the general consumption/information of MTNL except that deliberations through Committee of Secretaries meetings are being held at highest level of Department of Telecommunications (DoT) and other Govt.

Ministries for various options on way forward in case of MTNL and for further action for formal approvals of Government thereto. Therefore, no such specific decision or information is available at this point of time."

Also Read | MTNL deposits bond interest payout after government guarantee invocation

At 10:08 pm; MTNL shares were trading 19 percent higher at Rs 63.55 on NSE. So far in the day, a total of 12 crore shares of the firm changed hands on BSE and NSE combined, compared to 1-month and 1-week average trading volume of 2 crore and 5 crore shares, respectively.

So far this year, the stock has surged 91 percent, nearly doubling investors' money.

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