This PSU telecom stock has zoomed 65% in three weeks, at 4-year high now

Shares of Mahanagar Telephone Nigam Limited (MNTL) hit an over four-year high of Rs 29.60, on rallying 17 per cent in Tuesday’s intra-day trade amid back of heavy volumes on the BSE. The stock of state-owned telecom services provider was trading at its highest level since January 2018, when it hit a high of Rs 31.25, the BSE data showed.

In the past three weeks, the stock price of MTNL has appreciated by 65 per cent from level of Rs 17.95 on November 30, 2021, as the government announced its plan to sell real estate assets of state-run telecom firm.

The Department of Investment and Public Asset Management (DIPAM) invited bids to sell six assets of state-run telecom firms Bharat Sanchar Nigam Ltd (BSNL) and MTNL through its new asset monetisation portal. Both the public sector firms were to identify and monetise assets worth Rs 37,500 crore by 2022, the PTI had reported on November 22, 2021.

On December 7, the BSE said that the Exchange has sought clarification from MTNL with reference to movement in volume. The reply is still awaited.

At 12:04 pm; MTNL traded 15 per cent higher at Rs 29 on the BSE, as compared to 1.8 per cent rise in the S&P BSE Sensex. A combined 24.15 million shares were traded on the NSE and BSE.

In financial year 2020-21 (FY21) annual report MTNL said that the government has approved the monetization of assets so as to raise resources for retiring debt, servicing of bonds, network up gradation, expansion and meeting the operational fund requirements. As on March 31, 2021, net worth of MTNL was negative to the tune of Rs 16,039.88 crore and debts service as well as interest service coverage ratio is also negative.

However with the combined effect of reduction of staff cost by almost to the tune of Rs 1,700 crore per annum and the grant of Sovereign guarantee for Rs 6,500 crore by Government of India to MTNL as per Cabinet approval dated 23-10-2019 in the year 2020-21 and raising of bonds for the restructuring of existing debts and also to refinancing for working capital purposes as well as CAPEX infusion definitely made the company to run as a going concern despite huge debt costs in the year 20-21 also. However, the same remains a risk posing proposition unless the monetization plans and also the revenue mopping up programmes and investment in CAPEX are implemented in the years to come, MNTL said.

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