Mahanagar Telephone Nigam Ltd (MTNL) of India has successfully deposited the required payment for its upcoming bond interest, as disclosed to the exchanges on Wednesday.
MTNL had to place funds for its semi-annual 7.59% interest on July 2034 bonds into a third-party escrow account, ten days prior to the due date, under the bond terms. Initially, it failed to meet this obligation.
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Subsequently, the government invoked its guarantee, marking possibly the first instance of such action by merchant bankers. The struggling state-owned company, facing financial difficulties, received 936 million rupees ($11.21 million) from the government to cover the interest payment, as guaranteed under the bond agreement.
The government’s intervention ensured the transfer of funds three days ahead of the scheduled payment date. While there was confidence in avoiding default, some concerns were raised about the timing and communication surrounding the payment process.
MTNL, rated AAA (CE) by India Ratings and Careedge, benefits from government guarantees for both interest and principal repayments. Market participants are now anticipating further government support for MTNL’s upcoming financial obligations, including an interest payment of 1.4 billion rupees due over the next two months.
This development underscores the role of government guarantees in supporting state-run enterprises like MTNL during financial challenges.
Disclaimer: The views and investment tips expressed by investment experts on Sharepriceindia.com are their own and not those of the website or its management. Sharepriceindia.com advises users to check with certified experts before taking any investment decisions.
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