MTNL Posts ₹3,103 Cr Net Loss for FY26; Auditors Issue Severe Adverse Opinion over Unresolved Accounts

Synopsis:- With finance costs running at more than three times its operating revenues, MTNL posted a standalone net loss of Rs.3,103 crore for FY26; statutory auditors issued an adverse opinion, the most severe classification under Indian auditing standards, flagging twenty unresolved accounting issues, going concern uncertainty, and Rs.9,262 crore in bank loan defaults.

Shares of a state-owned telecom company came into focus on May 21, 2026, as its board approved audited results for the quarter and full year ended March 31, 2026, alongside a change at the Chief Financial Officer level. What distinguished the filing from prior years was the auditors’ stance: a formal adverse opinion on both standalone and consolidated accounts, rather than the qualified opinion that had been the norm. An adverse opinion is the most severe form of audit qualification available; it is a statement that the financial statements do not give a true and fair view, not merely that certain items require attention.

With a market capitalisation of approximately Rs. 1,559 crore, the shares of Mahanagar Telephone Nigam Ltd (MTNL) were last quoted at Rs. 29.43 per share, up 1.69 percent from its previous close of Rs.28.94.

On a standalone basis, revenue from operations fell 16.4 percent year-on-year to Rs. 887.27 crore in FY26 from Rs. 1,060.54 crore in FY25. The net loss for the year stood at Rs. 3,102.94 crore, slightly narrower than the Rs. 3,323.51 crore loss reported in FY25. The improvement, however, did not reflect any operational turnaround. Finance cost alone was Rs.2,982.95 crore for the year, exceeding operating revenues by a factor of 3.4; the company does not earn enough from its telecom operations to cover even a fraction of its debt service obligations.

Other income of Rs. 581.54 crore provided partial support, but Rs. 410.51 crore of that figure came from profit on the sale of properties under the government-approved land and building monetisation programme. Strip that out and the underlying income base is considerably thinner than the reported total. Net cash from operating activities stood at Rs.176.17 crore on a standalone basis. On a consolidated basis, revenue came in at Rs. 956.37 crore (down 15.3 percent YoY) and the net loss was Rs. 3,107.24 crore against Rs. 3,327.69 crore in FY25.

A breakdown of standalone revenues by segment reveals the extent of MTNL’s operating shift. Basic and other services contributed Rs.364.37 crore for the year, infrastructure leasing  which captures asset-leasing income and BSNL revenue shares  contributed Rs.507.14 crore, and cellular revenues accounted for just Rs.16.91 crore. More than half of MTNL’s reported operating revenue now derives from asset leasing and its BSNL revenue-share arrangement, not from direct telecom services to subscribers.

The statutory auditors, O P Bagla & Co LLP and S.L. Chhajed & Co. LLP, issued an adverse opinion on both the standalone and consolidated accounts, covering twenty separate grounds. Among the more material qualifications: the auditors were unable to independently verify the revenue-sharing computation under MTNL’s Service Level Agreement with BSNL, since the underlying data and methodology were not made available for their review. Revenue of Rs. 156.51 crore recognised on the basis of BSNL’s collections also raises questions about accrual compliance under Ind AS and whether related GST invoicing obligations have been discharged.

The auditors flagged that penal guarantee fees of Rs. 352.30 crore were classified as a contingent liability rather than a provision. In their assessment, since the April 30 payment deadline had elapsed, the obligation had crystallised and met all three recognition criteria under Ind AS 37, meaning liabilities are understated and the reported loss is correspondingly lower than it should be by that amount.

Additional qualifications covered non-compliance with Ind AS 116 on leases, non-reconciliation of TDS balances with Form 26AS, manual average billing in certain Delhi and Mumbai units due to software downtime, unlinked subscriber receipts of Rs.52.56 crore sitting as unmatched liabilities, and gaps in expected credit loss provisioning on inter-operator receivables totalling Rs.709.09 crore, of which only Rs.200 crore was provisioned during the year.

Debt, Default, and the BSNL Transition

Total financial indebtedness on a standalone basis stood at Rs.36,314 crore as of March 31, 2026, comprising bank loans of Rs.9,263 crore, sovereign guarantee bonds of Rs.24,071 crore, and a DoT loan of Rs.2,980 crore taken specifically to service bond interest obligations. Of the bank loan amount, Rs.3,614 crore was in formal default as of the balance sheet date and all related accounts have been classified as Non-Performing Assets by the respective banks. The listed bond programme carries a CARE D credit rating, placing it in outright default territory. The standalone net worth stood at negative Rs.29,974.84 crore.

Net receivables from BSNL of Rs.4,101.34 crore remain unreconciled and unconfirmed. Under the Service Level Agreement signed in November 2024 and made effective from January 1, 2025, BSNL has taken over all telecom operations in Delhi and Mumbai, including CAPEX, OPEX, billing, and collection for migrated customers.

MTNL now functions, in operational terms, primarily as an asset-holding entity monetising real estate to service a debt load its revenues could not conceivably sustain. A Committee of Secretaries constituted by the Government of India to review asset monetisation, AGR dues, and debt restructuring options continues to deliberate, with no public timeline for resolution announced.

Business Overview

MTNL is a Government of India enterprise incorporated in 1986 to provide telecom services in Delhi and Mumbai. Its operations span basic telephony, cellular services, and infrastructure leasing. 

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