Crisil Ratings Maintained Watch Negative Status for MTNL Bonds Amid Structured Payment Monitoring

Crisil Ratings Maintained Watch Negative Status for MTNL Bonds Amid Structured Payment Monitoring​

Mahanagar Telephone Nigam Ltd (MTNL), a Government of India Enterprise, has received a rating rationale from Crisil Ratings Limited. Crisil Ratings has maintained the rating on MTNL’s bonds and non-convertible debentures (NCDs) at 'Rating Watch with Negative Implications.'

The rating action covers a bond issuance of Rs. 6500 Crore and Non-Convertible Debentures (NCDs) of Rs. 20 Crore. For both instruments, Crisil has assigned a rating of AAA (CE), while simultaneously placing the company on 'Rating Watch with Negative Implications.'

Rating Status and Structure​

The rating for MTNL's bonds and NCDs is based on the strength of the unconditional and irrevocable guarantee provided by the Government of India through the Department of Telecommunications, Ministry of Communications.

The bonds issued by MTNL are backed by this central government guarantee, which covers the principal amount and accrued interest throughout the tenure. The rating rationale notes that the unconditional guarantee is not transferable to any agency without prior approval of the Ministry of Finance (budget division).

The pre-default structured payment mechanism was designed to ensure adequate funds were available in the designated account well before the actual payment date. This mechanism defines multiple timelines, with T-3 being the ultimate deadline for the government to transfer the requisite funds.

Watch Negative Implications​

Crisil Ratings has continued the rating watch negative since September 11, 2024. The initial negative watch was placed following non-adherence to the structured payment mechanism for government-guaranteed bonds (specifically for ISINs INE153A08139, INE153A08162 and INE153A08188).

While the bond obligations were met on the due date, the payment mechanism was found not to be adhered to as specified in the bond documents. Previously, a delay of 1 to 2 days occurred in funding the designated account beyond the T-3 date.

The rating agency notes that although there was a breach of T-10 days—when funds were not deposited 10 days prior to the due date due to liquidity challenges at the company, causing the trustee to invoke the guarantee on the T-8 day—the government has since been consistently funding the designated escrow account on or before the T-3 trigger date.

Crisil Ratings will continue to monitor adherence to the stipulated T-structure payment mechanism. Continued compliance with the structured mechanism will be a trigger to resolve the watch, while instances of non-adherence in upcoming repayments may lead to a downgrade of the rating.

Financial and Operational Overview​

MTNL was established by the Government of India in April 1986 to improve telecom services in Delhi and Mumbai. As of March 31, 2025, the company reported 0.99 million subscribers for mobile services and 2.00 million subscribers for fixed-line telephone connections.

The company's loan account with Bank of India (BOI) slipped into the non-performing account (NPA) category on September 4, 2024. However, Crisil Ratings stated that the operational status of the escrow accounts maintaining the government-guaranteed bonds would not be impacted by the NPA status of the loan account.

For operations, Crisil Ratings noted that BSNL took over the entire telecommunication operations of MTNL in Delhi and Mumbai effective January 1, 2025. This means BSNL will handle the capital expenditure and operational expenditure, ensuring EBITDA neutral operations for MTNL.

Key financial indicators for MTNL are detailed below:


The outstanding details for the rated instruments are summarized below:


The credit rating remains primarily driven by the unconditional and irrevocable guarantee from the Government of India and the established trustee-administered payment mechanism.

MTNL Stock Price Movement​

On Wednesday, Mahanagar Telephone Nigam Limited shares edged higher to close at ₹30.97, gaining 1.71% and marking an advance of ₹0.52 on the day. The stock saw notable trading interest, with over 1.29 million shares transacted during the session.