The shares of this PSU telecom company rose by 12% on Tuesday after reports indicated that the Indian government plans to restructure its debt and transfer its operations to BSNL.
At 11:10 a.m., On Tuesday, Mahanagar Telephone Nigam Ltd shares were trading at ₹53.90, up 10 percent from the previous close on the National Stock Exchange. The company has a market capitalization of ₹3,234 crores
Mahanagar Telephone Nigam offers a variety of telecommunication services, including telephone, telex, wireless data communication, telematics, and internet services in Mumbai and New Delhi.
Mahanagar Telephone Nigam Ltd (MTNL) shares have gained 30% in the last 5 years after the following news broke out:
What News:
The Indian government is considering transferring the operations of Mahanagar Telephone Nigam Ltd (MTNL) to Bharat Sanchar Nigam Ltd (BSNL) through an agreement, rather than merging the two companies, as reported by the Economic Times.
Reports indicate that MTNL has a high level of debt, making a merger with BSNL less favorable. Instead, the government plans to transfer MTNL’s operations to the larger telecom company BSNL.
Since MTNL operates only in Mumbai and Delhi, transferring its operations to BSNL, which has a nationwide presence, would provide a broader reach across India.
After the Economic Times report was published, the stock exchanges asked for clarification from MTNL on July 15, 2024. However, as of now, MTNL has not responded.
Government Intervention: In July 2023, MTNL raised ₹2,480 crore through non-convertible debentures (bonds) at an interest rate of 7.59%. The semi-annual interest payment on these bonds is due on July 20, 2024.
MTNL informed the stock exchanges that it couldn’t deposit the required amount in the escrow account 10 days before the due date due to a lack of funds, as required by the payment plan.
To prevent a default, the Government of India has decided to step in and pay the bond interest dues for MTNL. The government will deposit the necessary funds in the designated trust and retention account at least three days before the due date of July 20, 2024, according to a report by The Economic Times.
The government is also working on MTNL’s debt restructuring, which involves ₹28,000-30,000 crore and includes transferring staff to BSNL and retirements. as reported by the Economic Times.
This intervention by the Indian government is expected to revive MTNL’s business through restructuring in the near term. As a result, MTNL’s shares have surged over the last five days.
MTNL (Mahanagar Telephone Nigam Limited) is a wholly-owned subsidiary of Bharat Sanchar Nigam Limited (BSNL), India’s state-owned telecommunications company.
In 2019, the Indian Government announced a plan to revive BSNL and MTNL, which involved merging MTNL with BSNL. As of now, the merger has not been completed, so MTNL continues to operate as a subsidiary of BSNL.
Financials: The company’s revenue dropped by 14% from ₹935 crores in FY22-23 to ₹799 crores in FY23-24. Meanwhile, the net loss increased from ₹2,915 crores to ₹3,268 crores during the same period.
According to the latest shareholding pattern, the Government of India owns 56.25% of the company, domestic institutional investors (DIIs) hold 13.63%, and retail investors own 29.73%.
Written by Omkar Chitnis
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
