MTNL stock faced a significant drop after the State Bank of India (SBI) classified the public sector enterprise as a non-performing asset (NPA). This move sent shares of Mahanagar Telephone Nigam Limited (MTNL) spiraling down, hitting the lower circuit limit with a 5 percent decline.

The company's total debt now stands at a staggering Rs 31,944.51 crore, accompanied by mounting overdue payments to various banks.

As of September 30, 2024, SBI reported that MTNL owes Rs 325.53 crore. This classification as an NPA follows a similar action taken by Punjab National Bank (PNB) on September 9, along with other public sector banks that have also marked the company’s debt as problematic. The situation highlights MTNL’s ongoing financial difficulties.

In a formal communication to MTNL, SBI detailed that the company had been utilizing credit facilities in the form of a Term Loan.

The bank's letter specified that the instalment and interest payments for this loan account became overdue as of June 30, 2024, due to non-payment.

Since more than 90 days have lapsed since the due date, SBI categorized the account as a sub-standard NPA effective September 28, 2024.

The current outstanding debt owed by MTNL to SBI includes Rs 281.62 crore that is classified as overdue. SBI has urgently requested that MTNL settle this overdue amount to regularize the account.

The bank also warned that failure to address this payment could result in the application of a penal interest rate on the remaining balance.

Additionally, SBI is seeking clarity on MTNL’s land monetization strategy. The bank had previously received detailed year-wise cash flow projections related to this plan.

Specifically, SBI is interested in the status of an agreement with NBCC to develop a 13.88-acre land parcel located on Pankha Road in New Delhi for both residential and commercial purposes.

The bank inquired whether the proceeds from this development would be allocated towards repaying outstanding loans.

SBI has indicated that if MTNL fails to meet its payment obligations within the specified timeframe, the bank may have no choice but to initiate legal proceedings to recover the full amount owed, along with accrued interest.

Furthermore, SBI may pursue the enforcement of securities without further consultation with MTNL.

Following SBI’s classification of MTNL as an NPA, other banks, including Union Bank of India and Bank of India, have similarly categorized the company’s debt.

The financial woes of MTNL are intensifying, as the total debt reached Rs 31,944.51 crore by August 30, 2024. Earlier in September, MTNL notified stock exchanges of defaults on bank loans totaling Rs 422.05 crore.

These defaults encompass various overdue payments, including Rs 155.76 crore to Union Bank of India, Rs 40.33 crore to Bank of India, Rs 40.01 crore to Punjab & Sind Bank, Rs 41.54 crore to Punjab National Bank, and Rs 4.04 crore to UCO Bank.

As of 11:10 am, MTNL shares were locked at the 5 percent lower circuit limit, trading at Rs 52.09 on the National Stock Exchange (NSE). Despite this setback, the stock has seen a remarkable rise of around 57 percent this year, outperforming the benchmark Nifty, which has returned 15 percent.

Over the past 12 months, MTNL's stock has rallied more than 88 percent, compared to Nifty’s gain of approximately 28 percent during the same timeframe