State-run telecom operator Mahanagar Telephone Nigam Limited (MTNL) has approached the government for financial assistance as it is struggling to repay its debt obligations due to shortage of funds. With interest payments due within a week, the company risks being classified as defaulter if the dues are not cleared on time.
Sources confirmed that MTNL has asked the government for Rs. 1000 crore to meet debt repayments till March 2025. As most of MTNL’s borrowings carry sovereign guarantees, any instance of default would require government funding to honor the commitments. This has alarmed sections within the administration given the stressed financial condition of the PSU.
MTNL was sanctioned sovereign guarantees totaling Rs. 28,000 crore in the past two fiscal years to raise bonds. However, due to weak cash flows, there are concerns over its ability to service the increasing interest burden on time. The company had already delayed paying Rs. 35 crore to a bank last year, raising red flags.
MTNL was supposed to raise Rs. 17,500 crore through monetization of assets but has manged only Rs. 1500-1600 crore so far from this plan. Unless its proposals to divest land parcels are accelerated, frequent defaults cannot be ruled out. The telco posted losses of Rs. 2910 crore in FY23, on the back of slipping revenues.
With the first semi-annual interest payout due within a week, MTNL has notified exchanges of a likely default. The government will now have to release funds by the mandated deadline, or risk being classified as a sovereign defaulter itself. Immediate relief of Rs. 90-100 crore has been sought, but more will be required in the coming months to honor debt obligations.
