MTNL fails to fund semi-annual ESCROW deposit; stock jumps 10%

Mahanagar Telephone Nigam Ltd (MTNL) on Thursday informed exchanges that it could not fund the semi-annual ESCROW account deposit due to insufficient funds. "We would like to inform you that 8th Semi Annual Interest w.r.t. 6.85 per cent MTNL Bond Series VI (INE153A08097) is due on December 21, 2024. As per the Structured Payment Mechanism of Tri-Partite Agreement (TPA) signed among MTNL, Department of Telecommunications (DoT), Ministry of Communications, Govt. of India and Beacon Trusteeship Limited, MTNL has to fund the Semi-Annual Interest into the ESCROW Account with adequate amount 10 days before the due date," the loss-making telecom PSU said.

It is informed that due to insufficient funds MTNL could not fund the ESCROW Account with the adequate amount, it added.

It is also required to be mentioned that all bonds issued by MTNL are sovereign guaranteed bonds by the government. "In case of any default made by MTNL in payment of Principal and Interest on the Bonds issued by it then Sovereign guarantee will be invoked by the Debenture Trustee and the Govt of India is obliged to make the payment to MTNL for the same. The invocation of Sovereign Guarantee is based on Tripartite Agreements (TPA) entered into between Govt of India, Debenture Trustee and MTNL which were filed with BSE when Bonds were listed," the state-owned telecom firm also stated.

On the stock-specific front, MTNL shares surged 9.75 per cent to hit a day high of Rs 59.75. It was last seen trading 8.56 per cent up at Rs 59.10. At this price, the scrip has gained 24.63 per cent in a month.

The telecom PSU reported a net loss of Rs 888.41 crore for the second quarter that ended September 30, 2024 (Q2 FY25) as against a loss of Rs 771.82 crore in the previous quarter (Q1 FY25). Revenue slipped to Rs 158.80 crore in Q2 FY25 from Rs 169.40 crore in June 2024 quarter.

Earlier in October this year, it was reported that a revival plan for the cash-strapped telecom PSU may be a reality. However, there has been no such official statement released by MTNL yet.

Technically, support on the counter could be seen in the Rs 55.5-50 range. And, immediate resistance may be found above Rs 60.

Osho Krishan, Senior Research Analyst - Technical & Derivatives at Angel One, said, "The stock has shown a significant upward trend over the past three weeks. Currently, it appears likely to test the Rs 62-65 range in the near term, while support is anticipated around the Rs 50 zone."

Ravi Singh, Senior Vice-President (Retail Research) at Religare Broking, said, "The stock looked strong on daily charts. It has the potential to hit an upside target of Rs 62 in the near term. Keep stop loss placed at Rs 54 for this trade."

The company's stock has a negative price-to-equity (P/E) ratio of 1.12 against a price-to-book (P/B) value of (-)0.15. Earnings per share (EPS) stood at (-)52.69 with a return on equity of (RoE) 13.12.

"At present, 56.25 per cent of equity shares are held by the government and the remaining 43.75 per cent of shares are held by FIIs, Financial Institutions, Banks, Mutual Funds and others, including individual investors," MTNL mentioned.