MTNL NCDs remain on Rating Watch with Negative Implications by India Ratings
India Ratings has maintained MTNL's NCDs on Rating Watch with Negative Implications due to delays in adhering to the structured payment mechanism. Despite these delays, debt servicing has not been impacted due to government guarantees. MTNL's financial performance remains weak, with declining revenue and operating losses.
The 'Rating Watch with Negative Implications' suggests a potential for a downgrade if the issues are not resolved, which could impact investor confidence and the cost of future borrowing for MTNL. However, the strong GoI guarantee mitigates immediate default risk.
The rating remains on watch with negative implications due to continued delays in adhering to the structured payment mechanism for bond servicing, indicating ongoing financial and operational challenges for MTNL.
Mahanagar Telephone Nigam Limited (MTNL) has had its non-convertible debentures (NCDs) maintained on Rating Watch with Negative Implications by India Ratings and Research (Ind-Ra).
The rating action follows previous instances in August and September 2024 where MTNL experienced delays in adhering to the trustee-administered structured payment mechanism for its bonds. Specifically, there were breaches of the T-3 trigger date for Series VII-D and VIII-B bonds, and later for Series VIII-D bonds, due to delays in funding by the Government of India (GoI). While the GoI ultimately funded the designated accounts before the due dates, ensuring no delay in debt servicing, the non-adherence to the mechanism poses risks.
Ind-Ra is awaiting confirmation from MTNL regarding future adherence to the structured payment mechanism. The agency will continue to monitor the situation, particularly the confirmation of funding and the operational status of the designated account, to resolve the watch within the next six months.
MTNL's financial profile remains weak, with revenue declining to ₹5.5 billion in 9MFY26 from ₹8.2 billion in 9MFY25. The company reported operating losses of ₹2.4 billion in 9MFY26, and its gross debt increased to ₹347.7 billion at end-9MFY26. MTNL has also been categorized as NPA by its bankers due to non-payment of dues, although transactions continue in the designated bond escrow account with GoI fund infusions.
The NCD ratings are underpinned by a pre-default guarantee from the GoI. Despite the challenges, the guaranteed debt continues to be serviced on time through the trustee-controlled payment mechanism. The company's revival plan, including raising long-term bonds backed by a sovereign guarantee and the potential merger with BSNL, is ongoing.
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Mahanagar Telephone Nigam Limited filed this with the NSE as a statutory disclosure, categorised under credit ratings. It is a primary document, not a recommendation, and the desk marks it medium impact: worth reading, rarely worth acting on by itself.
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See the model portfoliosA plain-language summary of a public exchange filing by Mahanagar Telephone Nigam Limited. Read the original for the full detail.