MTNL shares may revive after Care Ratings upgrades long-term debt rating

Shares of  Mahanagar Telephone Nigam Limited (MTNL) may get a revival after rallying up to 6.34 percent at 58.49 per share on the BSE in Wednesday’s intraday deals. The MTNL share price surged after the domestic credit rating agency CARE Ratings upgraded its long-term debt instruments (bonds issue) of MTNL to ‘CARE AAA’, simultaneously removing the rating watch with negative implications and assigning a ‘Stable’ outlook.

CARE Ratings stated that the positive action follows a sustained track record of timely fund infusion by the Government of India (GoI) under the stipulated T-structure payment mechanism (SPM).

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“Rating assigned to long-term debt instruments [bonds issue] of MTNL principally rely on credit enhancement (CE) in the form of an unconditional and irrevocable pre-default guarantee from the Government of India (GoI), through the Department of Telecommunications (DoT), Ministry of Communications (MoC). The rating also takes comfort from the presence of SPM monitored by a third-party trustee,” CARE Ratings said in a statement. 

On December 11, 2024, MTNL informed the bourses that it had defaulted on a semi-annual interest payment of 6.85 percent for the MTNL Bond Series VI. The interest payment had to be paid 10 days before its due date of December 21, 2024.

 However, it stated that in case of any defaults, a sovereign guarantee will be invoked by the debenture trustee, and the Govt of India is obliged to pay MTNL for the interest or the principal amount.

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