Mahanagar Telephone Nigam Limited (MTNL), the state-owned telecommunications company in India, is taking significant steps to manage its financial challenges and restructure its debt. The latest move involves seeking shareholders’ approval to raise ₹3,126 crore through debt bonds backed by sovereign guarantees. This decision comes as part of MTNL’s broader debt restructuring plan and is expected to have a positive impact on the company’s financial stability.
The announcement regarding the debt bonds and shareholder approval was made through a regulatory filing by MTNL. The filing indicated that the company’s 37th Annual General Meeting (AGM) is scheduled for September 29, 2023. Given the ongoing COVID-19 pandemic, the AGM will be conducted through video conferencing or other audio-visual means to ensure safety and convenience.
The primary purpose of seeking shareholders’ approval is to empower MTNL’s board to issue sovereign guarantee bonds with a tenure of ten years or more, with a total value of up to ₹3,126 crore. This move aligns with MTNL’s strategic efforts to manage its debt and enhance its financial sustainability.
Additionally, the company aims to offer or invite subscriptions for Government Guaranteed, Unsecured, Listed, Redeemable Non-Convertible Debentures (NCDs), structured as bonds. These NCDs will be issued in one or more series or tranches, and the process will be conducted on a private placement basis.
MTNL’s decision to raise funds through debt bonds with sovereign guarantees is part of its larger debt restructuring plan, which has received approval from the Union Cabinet. As per the plan, MTNL is allowed to raise sovereign guarantee bonds with tenures of ten years or more, totaling ₹6,661 crore for the fiscal year 2023-24. The objective of this initiative is to help MTNL restructure its debt portfolio, lower interest costs, and improve its overall financial position.
This isn’t the first time that MTNL has turned to sovereign guarantee bonds to address its financial challenges. Earlier in 2023, the company successfully raised funds through private placement of sovereign guarantee NCDs. In one tranche of series VIII-A, MTNL raised ₹2,480 crore on July 20, 2023. Additionally, the company secured ₹1,055 crore in one tranche of series VIII-B on August 24, 2023. These funds have already contributed to MTNL’s efforts to strengthen its financial standing.
As of January, MTNL’s total debt amounted to ₹28,581 crore, underscoring the significance of the ongoing debt restructuring plan. The company’s budget projections for the fiscal year 2023-24 anticipate a net loss of ₹2,808 crore, making it imperative for MTNL to continue implementing strategies aimed at improving its financial health.
By seeking shareholder approval for the issuance of debt bonds backed by sovereign guarantees, MTNL is taking a proactive step toward achieving greater financial stability and sustainability. These measures align with the broader goal of enhancing the company’s competitiveness in India’s telecommunications sector and ensuring its continued service to customers across the nation.
