Mahanagar Telephone Nigam Limited (MTNL), a Government of India enterprise, has informed the stock exchanges about its inability to fund the 3rd semi-annual interest payment for the 7.51% MTNL Bond Series VIIID (INE153A08188) due on September 6, 2025. This disclosure has been made pursuant to Regulation 30 of SEBI (LODR) Regulations, 2015.

Bond and Escrow Payment Mechanism

As per the Structured Payment Mechanism outlined in the Tripartite Agreement (TPA) between MTNL, Department of Telecommunications (DoT), Ministry of Communications, Government of India, and Beacon Trusteeship Limited, MTNL is required to fund the semi-annual interest into the ESCROW Account maintained in Bank of India at least 10 days before the due date.

However, MTNL stated that due to insufficient funds, the required amount could not be credited to the ESCROW Account in time. This situation has been formally communicated to BSE and NSE.

Government Guarantee

All bonds issued by MTNL carry a sovereign guarantee from the Government of India. In the event of any default by MTNL in payment of principal or interest, the sovereign guarantee will be invoked by the debenture trustee. This ensures that the Government of India is obligated to make the payment, protecting investors against potential losses.

The invocation of the sovereign guarantee is governed by the Tripartite Agreements entered into among the Government of India, Debenture Trustee, and MTNL, which were filed with the BSE at the time of bond listing.

Implications for Investors

Investors holding MTNL 7.51% Bond Series VIIID can be assured that while there is a temporary delay due to insufficient funds, the Government of India guarantee safeguards their investment. The company has not defaulted on the bonds, and the structured mechanism ensures that payments will be made, albeit with a short delay.

Leadership Statement

The update was shared by Ratan Mani Sumit, Company Secretary of MTNL, highlighting the company’s commitment to transparency and regulatory compliance. MTNL continues to operate under financial constraints but emphasizes the security of investor interests through sovereign backing.

Conclusion

MTNL’s communication about the temporary delay in funding the 3rd semi-annual interest underscores the challenges faced by state-owned enterprises in managing cash flows while honoring bond obligations. With the Government of India’s sovereign guarantee, bondholders can remain confident that payments will be secured even if MTNL faces short-term liquidity issues.

The Upcoming IPOs in this week and coming weeks are Amanta Healthcare, Rachit Paints, Abril Paper Tech, Sneha Organics, Sugs Lloyd, .

The Current active IPO are Anlon Healthcare, NIS Management, Sattva Engineering Construction, Globtier Infotech, Current Infraprojects, Vikran Engineering, Shivashrit Foods, Anondita Medicare, Classic Electrodes (India).

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX.

Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst.