MTNL Secures Funding for 7.80% Bond Series VIID Interest Payment

1 min read     Updated on 21 Aug 2025, 03:02 PM
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Reviewed by
Radhika SahaniBy ScanX News Team
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Overview

Mahanagar Telephone Nigam Limited (MTNL) has arranged funding for the interest payment on its 7.80% Bond Series VIID. The company deposited the required funds into an ESCROW account with Bank of India on August 21, ahead of the August 24 due date. This action follows a structured payment mechanism for MTNL's bonds, which includes government guarantee provisions. While this demonstrates MTNL's ability to meet immediate obligations, the company continues to face broader financial challenges, including declining revenues and operating losses.

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Mahanagar Telephone Nigam Limited (MTNL), a government-owned telecommunications service provider, has successfully arranged funding for the interest payment on its 7.80% Bond Series VIID. The company disclosed this development in a recent regulatory filing, demonstrating its commitment to meeting its financial obligations.

Funding Arrangement Details

MTNL reported that it has completed the necessary funding preparations for the upcoming interest payment on its 7.80% Bond Series VIID (INE153A08139). The company has deposited the required funds into the designated ESCROW account maintained with Bank of India on August 21, well ahead of the interest payment due date of August 24.

Structured Payment Mechanism

The funding arrangement adheres to the structured payment mechanism established for MTNL's bonds. This mechanism, monitored by a third-party trustee, is designed to ensure timely servicing of bond obligations. As per the structure:

  1. MTNL is required to fund the trust and retention account 10 days prior to the due date for interest payments.
  2. In case of insufficient funds, the trustee can invoke the government guarantee.
  3. Upon invocation, the Government of India (GoI) must fund the designated account three days prior to the due date.

Government Support

The timely funding of the interest payment underscores the continued support MTNL receives from its majority shareholder, the Government of India. This support is crucial for MTNL, given its classification as an 'incipient sick central public sector enterprise' by the government.

Financial Context

While this funding arrangement demonstrates MTNL's ability to meet its immediate bond obligations, it's important to note the company's broader financial challenges. MTNL has been facing declining revenues and continued operating losses in recent years. The company's total revenue decreased to INR 7.00 billion from INR 8.00 billion in the previous fiscal year, primarily due to a shrinking subscriber base.

Conclusion

The successful funding arrangement for the 7.80% Bond Series VIID interest payment is a positive development for MTNL and its bondholders. It reflects the company's commitment to honoring its debt obligations and the ongoing support from the Government of India. However, MTNL's overall financial health and its ability to sustainably service its debt in the long term remain areas to watch for investors and stakeholders.

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MTNL Defaults on Multiple Bond Payments Due to Financial Constraints

1 min read     Updated on 15 Aug 2025, 07:42 AM
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Reviewed by
Riya DeyBy ScanX News Team
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Overview

Mahanagar Telephone Nigam Limited (MTNL) has failed to meet bond payment obligations for two series: 7.61% MTNL Bond Series VIIIB and 7.80% MTNL Bond Series VIID. The state-run telecom firm cited insufficient funds to deposit into its escrow account. Both bond series are covered by a Structured Payment Mechanism and carry a sovereign guarantee from the Government of India. The defaults raise concerns about MTNL's financial health and its ability to meet future obligations.

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*this image is generated using AI for illustrative purposes only.

Mahanagar Telephone Nigam Limited (MTNL), a state-run telecom firm, has failed to meet its bond payment obligations, signaling ongoing financial challenges for the company. The defaults span across multiple bond series, highlighting the severity of MTNL's liquidity crunch.

Default on 7.61% MTNL Bond Series VIIIB

MTNL was unable to repay its bond payment due on August 24, marking a default on the fourth semi-annual interest payment of 7.61% on MTNL Bond Series VIIIB. The company cited insufficient funds as the reason for its failure to deposit the required amount into its escrow account maintained with Bank of India.

Additional Default on 7.80% MTNL Bond Series VIID

In a separate disclosure, MTNL also reported its inability to fund the escrow account for the fifth semi-annual interest payment on its 7.80% MTNL Bond Series VIID, which was also due on August 24. This default further underscores the company's financial difficulties.

Structured Payment Mechanism and Government Guarantee

Both bond series are subject to a Structured Payment Mechanism outlined in a Tri-Partite Agreement (TPA) between MTNL, the Department of Telecommunications (DoT), and Beacon Trusteeship Limited. Under this agreement, MTNL is required to fund the escrow account 10 days before the due date of each interest payment.

It's important to note that all MTNL bonds carry a sovereign guarantee from the Government of India. In the event of a default, the debenture trustee can invoke this guarantee, obligating the government to make the necessary payments on behalf of MTNL.

Implications and Next Steps

These defaults raise concerns about MTNL's financial health and its ability to meet future obligations. While the sovereign guarantee provides a safety net for bondholders, it also potentially increases the financial burden on the government.

As the situation unfolds, stakeholders will be closely monitoring MTNL's efforts to address its liquidity issues and the potential invocation of the sovereign guarantee by the debenture trustee.

The company's struggle to meet its financial obligations underscores the challenges faced by state-run enterprises in India's competitive telecom sector. It remains to be seen how MTNL and the government will navigate this financial predicament in the coming months.

Historical Stock Returns for Mahanagar Telephone Nigam

1 Day5 Days1 Month6 Months1 Year5 Years
+4.11%+8.31%-8.75%-2.40%-30.91%+393.33%
Mahanagar Telephone Nigam
View in Depthredirect
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