MTNL lenders' debt relief hopes hit a property wall

Struggling telco has prime land, but rules prevent it from selling it to settle dues

- Jatin Grover & Shayan Ghosh

Debt-laden Mahanagar Telephone Nigam Ltd (MTNL) that sits on a land goldmine in metros faces trouble selling it to settle dues, frustrating banks awaiting dues of over ₹8,500 crore.

Lenders' plans to buy property from the defaulting telco and adjust it against dues have stalled due to curbs on the sale of these assets and land-usage norms, two people aware of the development said.

"Banks proposed to buy some of the properties of MTNL, but they did not agree. We could have adjusted it against the dues if the proposal was cleared," said a banker aware of the discussions.

The banker said MTNL can monetize about ₹5,000 crore if it divests its land and property holdings, allowing it to repay more than half of its outstanding bank loans. MTNL owed banks ₹8,585 crore as of 30 June. Its overall debt exceeds ₹33,000 crore.

Emails sent to MTNL's lead lender Union Bank of India and the department of telecommunications remained unanswered.

Although the government allows assets to be sold without auctions to central government organizations, state government entities and public sector banks, it does not authorize banks to settle dues by purchasing such property directly.