India Ratings Maintains MTNL's ₹17,571 Crore Bonds on 'Rating Watch Negative'

New Delhi, February 20, 2026: India Ratings and Research (Ind-Ra) has maintained Mahanagar Telephone Nigam Limited's (MTNL) non-convertible debentures (NCDs) aggregating ₹17,571 crore on 'Rating Watch with Negative Implications'. The rating action, communicated through a press release dated February 19, 2026, has been disclosed by MTNL to the stock exchanges pursuant to Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Rating Summary:

Note: Credit ratings with (CE) suffix indicate that the instruments are supported by an external explicit credit enhancement.

Unsupported Rating: Ind-Ra has affirmed the unsupported rating at 'IND D', reflecting consistent delays in bank debt servicing by the company.

Key Rating Drivers and Rationale:

The rating watch follows instances of non-adherence to the trustee-administered structured payment mechanism for MTNL's bonds. As per the structured payment mechanism, funds are required to be infused into the designated account by the Government of India (GoI) three days prior to the due date (T-3). However, in certain instances during August and September 2024 for Series VII-D, VIII-B, and VIII-D bonds, the T-3 trigger date was breached, with delays of one-to-two days in funding by the GoI.

Additionally, for all subsequent interest payments, while there was a breach of T-10 days (MTNL did not deposit funds in the designated escrow account 10 days prior to the due date due to liquidity challenges), the trustee invoked the guarantee on T-8 day. Notably, the GoI has consistently funded the designated escrow account before the T-3 trigger date, ensuring that there has been no delay in the servicing of debt obligations to bondholders, as the account was funded before the actual due date.

Ind-Ra stated that it is awaiting confirmation from the issuer regarding the process to be followed for upcoming bond repayments and steps to ensure adherence to the structured payment mechanism in the near to medium term. As non-adherence poses risks for potential delays, the agency continues to monitor the payment mechanism and keeps the ratings on watch.

Strengths of the Rating:

• Adequacy of CE Structure: The rating is underpinned by an absolute, unconditional, and irrevocable pre-default guarantee extended by the GoI for timely repayment of principal and interest on the rated NCDs for the full tenure.

• Strong Linkages with GoI: The GoI directly owns 56.25% of MTNL and secures about 66% of MTNL's total debt through pre-default guarantees. The GoI appoints all board directors and key management personnel through the administrative ministry.

Weaknesses:

• Delays in Funding Designated Account: MTNL has not been funding the designated trust and retention account 10 days prior to the due date due to insufficient funds since July 2024.

• Weak Financial Profile: MTNL's revenue declined to ₹5.5 billion in 9MFY26 from ₹8.2 billion in 9MFY25, with continued operating losses (9MFY26 loss: ₹2.4 billion).

• Default in Debt Servicing: MTNL has been categorized as NPA by all bankers due to tight liquidity at the standalone level.

Liquidity Position:

Ind-Ra assessed MTNL's liquidity as poor on a standalone basis, with cash levels of ₹0.6 billion at end-1HFY26 and average fund-based bank line utilization at around 111% for the 12 months ended January 2026. However, the guaranteed debt backed by the structured payment mechanism continues to be serviced on time.

Rating Sensitivities:

The Rating Watch with Negative Implications indicates that the rating may be either affirmed or downgraded. Ind-Ra expects to resolve the watch within the next six months upon:

• Confirmation of funding and continued operational status of the designated account to ensure continued payments to bondholders.

• Receiving sustained visibility about the adherence of the structured payment mechanism on the bonds rated by the agency over the near to medium term.

Further delays in funding the designated account beyond the due date shall remain a key rating sensitivity.

Revival Plan:

In July 2022, the Union Cabinet approved a revival plan for MTNL, including raising long-term bonds of ₹176 billion backed by sovereign guarantee for debt repayment. Against this plan, the company raised NCDs worth ₹176 billion over FY23-FY24.

Disclosure to Stock Exchanges:

The information has been submitted to BSE Limited (Scrip Code: 500108) and the National Stock Exchange of India Limited (Scrip Symbol: MTNL) for record and dissemination to members and the public.