Not Airtel, Tata, Or Vodafone, But Govt-Backed MTNL Becomes Multibagger Stock In 6 Months, 113% Returns

On January 24, government-backed Mahanagar Telephone Nigam (MTNL) locked on its 20% upper circuits at Rs 41.64 apiece on BSE. This smallcap emerged among the top performing stocks of the day. Riding on the back of bulls, MTNL has become a multi-bagger in six months, outperforming big telecom giants like Bharti Airtel, Tata Communications, and even troubled Vodafone Idea.

The 10% upper circuit is also MTNL's fresh 52-week high on BSE.

Setup in April 1986, MTNL was founded by the Government of India to upgrade the quality of telecom services, expand the telecom network, introduce new services and raise revenue for the telecom development needs of India's key metro cities of Delhi & Mumbai.

In six months, MTNL's share price has rallied by a whopping 113.32% as of now. This is far better compared to Airtel stock's upside of 35%, and Vodafone Idea which gained by nearly 89%. Meanwhile, Tata Communications was far from the league with merely a little over 7% gain.

MTNL plans to deliver its Q3 results for FY24 on February 13, 2024. The company has witnessed several changes in its top management in recent times.

In Q2 of FY24, MTNL's net loss narrowed to Rs 792.67 crore compared to a net loss of Rs 850.15 crore in Q1FY24. However, revenue from operations was lower at Rs 181.98 crore compared to Rs 184.56 crore in Q1FY24 and Rs 220.21 crore in Q2FY23.

As per the Trendlyne data, among the positives for MTNL's share price are:

- Stock Price rose 62.14% and outperformed its sector by 5.09% in the past year.

- Debt to Equity Ratio of -1.35 is less than 1 and healthy. This implies that its assets are financed mainly through equity.

- Promoter Pledges are zero.

- Mutual Fund Holding remained the same in the last quarter at 0%.

Among the negatives for the stock are:

- Promoter Share Holding decreased by 0.57% in the most recent quarter to 56.25%.

The price to Earning Ratio is -0.83, which is negative.

- Interest Coverage Ratio is 0.07, less than one. This means that it is unable to pay interest with its earnings (EBIT).

Further, Trendlyne data revealed that the stock's weekly average delivery volume is 26.83%. The stock is trading above 8 out of 8 SMAs, and above 5 out of 9 Oscillators in the bullish zone.

Last year, in February, Minister of State for Communications, Devusinh Chauhan in a written reply to a question in Lok Sabha highlighted about the revival plan approved by the government in October 2019. The minister revealed that as a result of this, BSNL and MTNL have become EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) positive since the financial year 2020-21.

For the government-backed telecom companies, the revival plan inter-alia includes measures to reduce the Staff cost through a Voluntary Retirement Scheme (VRS) for employees of age 50 years and above, administrative allotment of spectrum for providing 4G services with funding through budgetary allocation, monetisation of non-core and core assets to generate resources to retire debt, meet CAPEX and other requirement and debt restructuring by raising of Sovereign Guarantee Bonds.

The government also approved the allotment of spectrum to BSNL and MTNL for providing 5G services on the same principles as followed for 4G. BSNL and MTNL would rollout 4G and 5G services based on techno-commercial considerations.

Disclaimer: The write-up just highlights the stock's performance and fundamentals, and is not a recommendation to buy, sell or hold. We have not done fundamental or technical analysis and have no opinion on the stock mentioned. Neither, the author nor Greynium Information Technologies should be held liable for any losses. Please consult a professional advisor.