Mahanagar Telephone Nigam Limited (MTNL) has received penalty notices from both the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) for non-compliance with board composition requirements under SEBI regulations. The telecommunications PSU disclosed the fines in a regulatory filing dated February 28, 2026, in compliance with Regulation 30 of SEBI (LODR) Regulations, 2015.

Fine Details and Regulatory Violations

Both exchanges imposed identical fines on MTNL for violations of Regulation 17(1) of SEBI (LODR) Regulations, 2015, specifically related to non-compliance with board composition requirements. The fines were communicated through letters dated February 27, 2026.

Company's Response and Justification

MTNL has attributed the non-compliance to its unique structure as a Public Sector Undertaking. The company emphasized that all board appointments, including independent directors, are made by the Administrative Ministry - the Department of Telecommunications (DoT), Ministry of Communications, Government of India.

The company noted that two independent directors, including one woman independent director, were appointed by DoT through a letter dated April 15, 2025, effective from the same date. MTNL has already approached the Government of India for the appointment of four additional independent directors to achieve full compliance.

Waiver Request and Payment Timeline

MTNL has requested both NSE and BSE to waive the imposed fines, citing the government-controlled nature of board appointments. The company stated there would be no material impact on its financial, operational, or other activities due to these fines.

Both exchanges have provided a 15-day timeline from the notice date for fine payment. The exchanges have also specified that continued non-compliance could result in:

• Freezing of promoter shareholding
• Transfer to Z group for second consecutive quarter violations
• Potential suspension of equity share trading

Compliance Timeline and Penalties

According to the NSE notice, the fine calculation was based on 92 days of non-compliance during the quarter ended December 31, 2025, at Rs 5,000 per day. The exchanges have warned that fines will continue to accrue until compliance is achieved or trading is suspended.

MTNL is required to place this matter before its Board of Directors in the next meeting and inform the exchanges of the board's comments for dissemination.

Source: None/Company/INE153A01019/b1d5bcff-fa83-4e2b-baa1-63f04d83f9d0.pdf

Mahanagar Telephone Nigam Limited (MTNL) has submitted CRISIL's rating rationale to stock exchanges under Regulation 30 compliance, with the credit rating agency maintaining its 'Watch Negative' status on the company's government-guaranteed bonds and debentures.

Rating Action and Current Status

CRISIL Ratings has continued the 'Watch Negative' rating on MTNL's debt instruments, maintaining the cautious outlook that was first implemented in September 2024.

The rating was initially placed on 'watch negative' on September 11, 2024, following non-adherence to the structured payment mechanism for government-guaranteed bonds. Though bond obligations were met on due dates, the payment mechanism specified in bond documents was not followed, with delays of 1-2 days in funding the designated account beyond the T-3 date.

Payment Mechanism Adherence

CRISIL has observed consistent adherence to the trustee-administered structured payment mechanism since September 21, 2024. For all subsequent interest payments from September 11, 2024, there has been adherence to timelines defined in bond documents. While there was a breach of T-10 days wherein funds were not deposited in the designated escrow account 10 days prior to the due date by MTNL due to liquidity challenges, the government has been consistently funding the designated escrow account on or before the T-3 trigger date.

Financial Performance Impact

MTNL's operating performance has continued to deteriorate during the rating period. Operating revenue declined to Rs.547 crore for the first nine months of fiscal 2026 from Rs.712 crore in the corresponding period of the previous fiscal. Consequently, the operating loss widened to Rs.241 crore (excluding non-operating income) from Rs.175 crore.

The decline in operating revenue is attributed to the service agreement with Bharat Sanchar Nigam Ltd (BSNL), effective January 1, 2025, which led to migration of certain customers in Delhi and Mumbai to BSNL, resulting in MTNL not recognising the revenue.

Key Financial Indicators

NM: Not meaningful as the numbers are negative

Rating Outlook and Risk Factors

CRISIL awaits confirmation from MTNL on the process to be followed for ensuring adherence to the structured payment mechanism. Sustained adherence to the stipulated T-structure payment mechanism will be a trigger to resolve the watch status. However, instances of non-adherence to the structured payment mechanism in upcoming repayments may lead to a rating downgrade.

The rating agency has noted that MTNL's loan account with Bank of India slipped into the non-performing account (NPA) category on September 4, 2024. All escrow accounts pertaining to the servicing of government-guaranteed bonds are maintained with Bank of India, though operational status of escrow accounts will not be impacted by the NPA status.

Government Support Structure

The rating continues to be supported by the credit enhancement provided by the unconditional and irrevocable guarantee from the Government of India through the Department of Telecommunications, Ministry of Communications, and the trustee-administered payment mechanism. The government has provided a loan of Rs.2,839 crore for payment of interest on sovereign guarantee bonds issued by MTNL.

Under the service agreement signed on November 22, 2024, between BSNL and MTNL for 10 years, the entire telecommunication operations of MTNL in Delhi and Mumbai are being run by BSNL with effect from January 1, 2025. BSNL will be responsible for capital expenditure and operational expenditure of MTNL, ensuring EBITDA neutral operations.