CRISIL Ratings has kept MTNL's Rs 6,500 crore bonds and Rs 20 crore NCDs on 'Rating Watch with Negative Implications'. Despite sovereign guarantee support, the agency flagged persistent breaches of the T-10 day funding deadline in the structured payment mechanism. Investors should note the company's weak financial risk profile, marked by FY26 losses of Rs 3,107 crore and the classification of its Bank of India account as an NPA.
CRISIL Maintains Rating Watch on MTNL Bonds Over Payment Delays
CRISIL Ratings has retained the 'Rating Watch with Negative Implications' on Rs 6,500 crore of bonds and Rs 20 crore of NCDs.
MTNL continues to struggle with liquidity, with FY2026 losses reported at Rs 3,107 crore and its Bank of India loan account currently classified as an NPA.
Reader Takeaway: Sovereign backing remains a support pillar, but persistent payment timeline breaches and NPA status indicate deep financial strain.
What just happened
CRISIL Ratings has decided to continue the 'Rating Watch with Negative Implications' on MTNL's debt instruments. The primary reason for this action is the company's failure to consistently adhere to the structured payment mechanism timelines. While the Government of India provides an unconditional guarantee, MTNL has frequently missed the T-10 day funding deadline, forcing the trustee to trigger guarantees to ensure payments are met.
Why this matters
For investors, this watch status underscores the company's severe liquidity challenges. While the sovereign guarantee ensures that bondholders are ultimately paid, the repeated failure to follow the established internal payment structure signals a lack of standalone financial health. Additionally, the classification of the company's loan account with the Bank of India as an NPA as of September 4, 2024, highlights the depth of the firm's fiscal distress.
Operational Shift
As of January 1, 2025, a major operational shift has taken place. Under a 10-year service agreement signed in late 2024, BSNL has taken over the management of MTNL's telecom operations in Delhi and Mumbai. BSNL is now responsible for both capital and operational expenditure, with the objective of making MTNL's operations EBITDA-neutral.
Risks to watch
The 'Rating Watch' will persist until there is sustained adherence to the structured payment mechanism. The 'CRISIL D' unsupported rating reflects the company's continued delays in servicing non-guaranteed debt, which began in June 2024. The reliance on external sovereign support to meet obligations remains the central theme for credit assessment.
Context Metrics (FY2026)
- Revenue: Rs 956 crore
- Net Loss: Rs 3,107 crore
- NPA Status: Bank of India account classified as NPA on Sep 4, 2024