MTNL Fails to Fund Bond Escrow Account Amid Liquidity Crisis

NEW DELHI – State-run telecom operator Mahanagar Telephone Nigam Limited (MTNL) has officially informed stock exchanges of its inability to fund the escrow account for its upcoming bond interest payment. In a regulatory filing on January 30, 2026, the company cited "insufficient funds" as the reason for failing to meet the pre-funding requirement for its 7.78% Bond Series VIIC (ISIN: INE153A08121).

The interest payment is due on February 10, 2026. Under the existing Tripartite Agreement (TPA) with the Department of Telecommunications (DoT) and Beacon Trusteeship Limited, MTNL is mandated to deposit the required amount into its Bank of India escrow account at least 10 days prior to the due date.

The Sovereign Safety Net

While the funding failure underscores MTNL’s dire financial state, bondholders remain protected by a robust "Structured Payment Mechanism."

• Sovereign Guarantee: These bonds carry an unconditional and irrevocable guarantee from the Government of India.
• Guarantee Invocation: Since MTNL failed to fund the account by the T-10 (10 days before) deadline, the Debenture Trustee is now empowered to invoke the sovereign guarantee.

Financial Context: "Incipient Sick" Status

MTNL's financial health has deteriorated to the point where it is classified as an "incipient sick" Central Public Sector Enterprise (CPSE).

• Debt Burden: As of December 31, 2025, total bank borrowings reached ₹9,036 crore, with a total debt pile exceeding ₹35,000 crore.
• Operational Shift: To stem losses, the government has already moved to have BSNL take over MTNL's day-to-day operations and network maintenance in Delhi and Mumbai.
• Asset Monetization: The company is currently liquidating real estate, including a recent ₹350 crore sale of residential property in Mumbai's BKC to NABARD, to bridge its immediate cash gaps.
• Government Obligation: Once the guarantee is invoked, the Government of India is legally obligated to transfer the necessary funds to the escrow account to ensure bondholders are paid on time.