NEW DELHI: The government has no plans for de-listing the shares of the ailing Mahanagar Telephone Nigam (MTNL), a senior government official told FE on Wednesday, adding that reports to the contrary are incorrect.
The comment came in the wake of a four-fold sure in MTNL share price in less than a year, presumably because investors bet on the stock, in anticipation of de-listing. This followed reports of an earlier plan of the government to merge the loss-making company with Bharat Sanchar Nigam (BSNL).
After the merger plan was dropped, MTNL board has recently approved a service agreement with BSNL for a period of 10 years, under which the latter will function as a management agency for the former.
“Probably, some people want to keep that share price (high) in anticipation that they can make a gain from the company’s rumoured delisting. However, there is no chance of MTNL being delisted.,” the official added.The source added that the decision to make BSNL the management agency for MTNL was taken, given the complexities of a merger of the two state-run entities, which was earlier being considered as one of the options to salvage MTNL.
The Securities and Exchange Board of India allows companies allows companies to de-list using a fixed price mechanism, and the stock’s weighted average price is a determinant in the process.
Meanwhile, the speculation about MTNL’s delisting had led to a four-fold increase in its share price in less than a year to Rs 92.23 as on July 29, 2024, from Rs 23.87 on September 12, 2023. The share closed at Rs 53.79 on Wednesday, down 4.15% from the previous close.
“MTNL is unable to pay back loans and is defaulting to banks. Still the stock is holding to high levels,” the official noted.
MTNL was the second most loss-making central public sector enterprise (CPSE) with a loss of Rs 3,302 crore in FY24. It has a negative net worth (-Rs 23,663 crore) in FY24, up 13.5% on year. MTNL’s total revenue stood at Rs 1,301 crore in FY24, down 16% on year.
Currently, the total debt of the company stood at Rs 31,944 crore. On August 5, the company said it defaulted on bank loan payments worth Rs 422 crore, which includes a Rs 93 crore interest for the June and July period.
Currently, MTNL provides services across Delhi and Mumbai, and BSNL in the remaining circles pan-India. MTNL has about 1.9 million wireless subscribers with a market share of 0.2% as of May-end, according to the data by the Telecom Regulatory Authority of India. It provides landline services, GSM Services, fixed and mobile services and broadband services, Internet, etc.
Source: The Financial Express
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