Mahanagar Telephone Nigam Ltd (MTNL) is making headlines as its stock surged 9.75% despite announcing its inability to fund the semi-annual ESCROW account deposit. The telecom PSU cited insufficient funds as the reason for the missed deposit, raising questions about its financial stability.
Yet, market optimism persists, with the stock gaining 24.63% in a month. Here’s an analysis of MTNL’s performance, financials, and the technical outlook.
MTNL’s ESCROW Deposit Issue
- MTNL informed exchanges that it could not fund the semi-annual ESCROW account deposit required under the structured payment mechanism for its 6.85% MTNL Bond Series VI due on December 21, 2024.
- According to the Tripartite Agreement (TPA), a sovereign guarantee ensures that the Government of India will fulfill the payment obligations in case of a default.
Financial Performance and Challenges
| Metric | Q2 FY25 | Q1 FY25 |
|---|---|---|
| Net Loss | ₹888.41 crore | ₹771.82 crore |
| Revenue | ₹158.80 crore | ₹169.40 crore |
| Earnings per Share (EPS) | (-)₹52.69 | (-)₹45.83 |
- MTNL reported a widened net loss of ₹888.41 crore in Q2 FY25 compared to Q1 FY25.
- Revenue declined by 6.25% quarter-on-quarter, reflecting persistent operational struggles.
Stock Performance and Market Activity
- Current Price: ₹59.10 (up 8.56% intraday).
- Monthly Gain: The stock has surged 24.63% over the past month.
- Support Levels: ₹55.5-50.
- Resistance Levels: ₹60-65.
Analysts’ Views and Technical Analysis
Osho Krishan, Angel One
- Outlook: The stock is expected to test the ₹62-65 range in the near term.
- Support: Around ₹50.
Ravi Singh, Religare Broking
- Recommendation: Buy with a stop loss at ₹54.
- Target: ₹62.
Technicals:
| Indicator | Details |
|---|---|
| P/E Ratio | (-)1.12 |
| P/B Value | (-)0.15 |
| Return on Equity (RoE) | 13.12% |
Shareholding Pattern
| Category | Shareholding (%) |
|---|---|
| Government of India | 56.25% |
| FIIs, Banks, Mutual Funds | 43.75% |
Revival Prospects
- Revival Plan: Reports from October suggested a potential revival plan for MTNL, but no official confirmation has been issued.
- Sovereign Backing: The sovereign guarantee provides a safety net for bondholders, ensuring payment even in case of default.
Should You Invest in MTNL?
Pros:
- Significant price momentum with a potential upside to ₹65 in the near term.
- Sovereign guarantee reduces bondholder risk.
- Government backing ensures financial stability in the long term.
Cons:
- Persisting net losses and declining revenues.
- High volatility with a beta of 1.3.
- Poor fundamental indicators, including a negative P/E and P/B ratio.
Verdict:
Investors with a high-risk appetite and a short-term trading perspective may consider the stock, given its recent momentum and technical outlook. Long-term investors should remain cautious due to the company’s financial challenges and lack of confirmed revival plans.
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Disclaimer
This article is for informational purposes only. Consult a financial advisor before making any investment decisions.