Doubles Rs 50,000 Investment In 6 Months; Govt-Backed Telecom Stock MTNL Hits New 52-Week High

Government-backed 37-year-old telecom services providers in metro cities of Mumbai and Delhi, Mahanagar Telephone Nigam Limited (MTNL) witnessed a crowd of massive bulls on Monday as the share price touched a new 52-week high. Bulk shares have exchanged hands on BSE. But MTNL shares are on a winning streak for three-consecutive days, rising by over 28% on BSE. Due to the robust upside, MTNL shares have nearly doubled investments in six months.

In the early trade, MTNL shares touched a new 52-week high of Rs 33.53 apiece on BSE. At the time of writing, the stock traded at Rs 32.70 apiece, up by 11.04%. Overall, in the current session so far, the stock has skyrocketed by nearly 14%.

Data on BSE showed that MTNL saw bulk deals of 118,572 shares at 9.15 a.m., 152,227 shares at 9.16 a.m., 137,565 shares at 9.19 a.m., 126,593 shares at 9.22 am, a huge 224,449 shares at 9.34 am, and 139,212 shares at 9.46 am. The stock continued to record bulk deals since the opening bell from 9:15 am to 11 a.m.

At the moment (11.39 am), the stock witnessed buying of 53,24,548 equity shares against selling of 8,54,275 equity shares.

The names of the buyers and sellers were not known immediately. More buying continues in MTNL.

Last week, on September 22, MTNL shares advanced by nearly 9% followed by a 3.3% upside on September 21. That being said, MTNL shares are up by 28.2% in a three-day rally.

Although less than a week is left for September to be over, MTNL has already given fruitful returns as the share price zoomed by nearly 49% so far in the current month. Meanwhile, MTNL skyrocketed by nearly 90% in six months.

Using the Axis Direct calculator, let's suppose an investor bought MTNL shares to the tune of Rs 50,000. In six months, their investment will rise to nearly Rs 95,000 corpus.

Optimism in MTNL shares emerged after the company announced a memorandum of understanding (MoU) with another public sector undertaking, BSNL on August 31, 2023. The MoU with BSNL will pave the way for synergy of operations between MTNL & BSNL in order to provide Pan India Telecom Services as a Public Sector Enterprise under the Government of India.

MTNL is a loss-burdened company currently as it struggles to keep market share and subscribers against the private telecom companies. In the June 2023 quarter, MTNL's consolidated net loss widened to Rs 851.93 crore as against Rs 653.07 crore in Q1FY23, while revenue from operations was lower to Rs 199.48 crore compared to Rs 250.72 crore in Q1 of FY23.

Due to the lack of full-scale 4G and intense competition, MTNL's subscriber base dropped by 29% to 23.5 lakh subscribers as of March 2023, compared to 32.96 lakh subscribers for its wireless services in 2021.

Nevertheless, MTNL is raising funds through the issuance of new securities. Last month, on August 24, the company issued 1,05,500 new debt securities on private placement having a face value of Rs 1 lakh each with a coupon rate of 7.61%. This issuance has a AAA(CE)/Stable rating from both CARE and India Ratings.

While in July, the company allotted 2,48,000 Government of India Guaranteed Unsecured Rated listed Redeemable NonConvertible and Taxable bonds like Debentures Series VIII-A. It has a coupon rate of 7.59%.

According to ICICI Direct's website, the key strengths of MTNL are --- price above short, medium and long-term moving averages; and effectively using its capital to generate profit - RoCE has improved in last 2 years. Also, the MTNL stock's RSI indicates price strength, while it has a Low PE (PE R1) which creates an opportunity for MTNL.

However, in case of weakness, the brokerage highlighted for MTNL are -- High-Interest Payments Compared to Earnings; Inefficient use of assets to generate profits - ROA declining in the last 2 years; and Degrowth in Revenue and Profit.

MTNL was set up on 1st April 1986 by the Government of India to upgrade the quality of telecom services, expand the telecom network, introduce new services and raise revenue for telecom development needs of India's key metros Delhi, the political capital and Mumbai, the financial capital of India. MTNL services are also available in the island nation of Mauritius in Africa.

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