Shares of Mahanagar Telephone Nigam Limited (MTNL) have experienced a notable uptick, rising by nearly 4% on October 14, 2024. The increase is attributed to discussions around a potential revival plan for the company, which is burdened with over ₹31,000 crore in debt owed to various lenders. Reports suggest that the National Company Law Tribunal (NCLT) route may not be pursued, aiming instead to maintain MTNL as a functioning entity.
Details of Revival Plans
According to sources, the government's strategy focuses on ensuring that MTNL remains operational. Instead of heading towards insolvency, which would set a concerning precedent for public sector undertakings (PSUs), a fund infusion may be on the table. A Committee of Secretaries is currently evaluating this possibility to keep MTNL viable.
Land Monetisation and Loan Repayment
State Bank of India (SBI) is actively seeking insights into MTNL's land monetisation plans. The bank has inquired whether the proceeds from a significant project in collaboration with the National Buildings Construction Corporation (NBCC) will be utilized to address outstanding loans. This follows SBI's recent classification of MTNL as a non-performing asset (NPA), a label that has now extended to other lenders like Union Bank of India and Bank of India.
Government's Stance on Support
Previous reports have indicated that the government is cautious about providing extensive support to MTNL, opting instead to honor existing commitments related to interest on Sovereign Guarantee Bonds. This suggests that while immediate help may be limited, the possibility of fund infusion cannot be entirely dismissed. An estimated requirement of ₹8,000 crore has been highlighted to stabilize MTNL's finances.
Market Reaction and Performance
Following the news of potential revival plans, MTNL's shares reached a day's high, trading above ₹59. Year-to-date, MTNL shares have appreciated by approximately 58%, reflecting a growing investor interest amid the uncertainty surrounding the company's financial health. The market remains optimistic, albeit cautious, as stakeholders await more definitive actions from the government and financial institutions.
Conclusion: A Glimmer of Hope for MTNL
The prospect of a revival plan offers a glimmer of hope for MTNL as it navigates its financial challenges. With the possibility of avoiding the NCLT route and exploring land monetisation strategies, the company may yet turn its fortunes around. However, the ongoing scrutiny from financial institutions and the government's cautious approach underscore the need for a solid plan to ensure MTNL's sustainability in the competitive telecom sector.
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