MTNL Misses Escrow Funding for 5th Interest Payment on 7.78% Bond Series Due August 10

Mahanagar Telephone Nigam Limited has informed stock exchanges about its inability to fund the mandatory escrow account for upcoming bond interest payments, highlighting the state-owned telecom company's deepening financial crisis. The development comes amid ongoing government efforts to monetise MTNL assets as part of a comprehensive debt resolution strategy.

MTNL Cannot Fund ₹1,151 Crore Interest Payment 

On July 31, 2025, MTNL informed BSE and NSE that it could not fund the escrow account maintained in Bank of India for the 5th semi-annual interest payment on its 7.78% Bond Series VIIC due on August 10, 2025. According to the Structured Payment Mechanism under the Tri-Partite Agreement signed among MTNL, Department of Telecommunications, and Beacon Trusteeship Limited, the company was required to fund adequate amounts 10 days before the due date.

As of March 31, 2025, MTNL's total liabilities included ₹24,071 crore in sovereign-guaranteed bonds and ₹1,151 crore in unpaid bond interest owed to the Department of Telecommunications, demonstrating the scale of the company's financial distress.

Sovereign Guarantee Mechanism and Government Obligations

All bonds issued by MTNL are sovereignly guaranteed by the Government of India under Tri-Partite Agreements entered between the Government, Debenture Trustee, and MTNL. In case of any default by MTNL in payment of principal and interest, the sovereign guarantee will be invoked by the Debenture Trustee, obligating the Government of India to make payments on behalf of MTNL.

The invocation mechanism is based on the TPA provisions that were filed with BSE when the bonds were originally listed, providing protection to bondholders despite MTNL's operational and financial challenges.

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₹33,568 Crore Total Liabilities and Multiple Defaults

MTNL's financial position has deteriorated significantly with total liabilities of ₹33,568 crore as of March 31, 2025, including ₹8,346 crore in bank loans, ₹24,071 crore in sovereign-guaranteed bonds, and ₹1,151 crore in unpaid bond interest. The company has defaulted on loans to 7 public sector banks, including State Bank of India, Bank of India, Punjab National Bank, UCO Bank, Punjab & Sind Bank, and Indian Overseas Bank.

MTNL Asset Monetisation Strategy Under Government Review

The Centre is implementing a comprehensive ₹16,000 crore asset monetisation plan covering both BSNL and MTNL, with MTNL's contribution targeted at approximately ₹4,500 crore. Initial valuation of some MTNL assets has been pegged at ₹6,000-7,000 crore, with valuation surveys underway in Delhi and Mumbai to accelerate the process.

The government has approved a non-auction route for asset sales to state and central government entities at simple valuation to expedite the monetisation process and address mounting debt obligations.

MTNL Operational Assets Merged with BSNL

All operational assets of MTNL, including telephone exchanges, power plants, batteries, cables, software and hardware, were merged with BSNL effective January 1, 2025. Telecom Minister Jyotiraditya Scindia confirmed that MTNL's bank debt renegotiation with lenders is being handled by the Ministry of Finance, with an account resolution plan expected by December 2025.

Mahanagar Telephone Nigam Share Price Performance

On July 31, 2025, Mahanagar Telephone Nigam share price opened at ₹47.00 on NSE, below the previous close of ₹47.86. During the day, it surged to ₹48.03 and dipped to ₹45.63. The stock is trading at ₹45.68 as of 3:17 PM. The stock registered a significant decline of 4.55%.

Over the past week, it has declined by 3.97%, over the past month, it has declined by 10.36%, and over the past 3 months, it has moved up by 9.83%.

Conclusion

MTNL's inability to fund the escrow account for its 5th semi-annual interest payment on 7.78% Bond Series VIIC due August 10, 2025, underscores the severity of its financial crisis with ₹33,568 crore total liabilities. While sovereign guarantee provisions protect bondholders, the development highlights the urgent need for the government's ₹4,500 crore asset monetization plan to address the state-owned telecom company's mounting debt obligations and restore financial stability.

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