MTNL buzzing on tax refund

Over the past three days, MTNL has been showing an unusual spike up its volumes. Today volumes are currently up over 2.2 times and the stock after hitting an intra day high at Rs.18.33 is now at Rs.17.55, up 1%.

The stock is buzzing after the Cabinet yesterday granted the company relief in terms of tax refund. MTNL will now get a tax refund of Rs.4533.97 crore, which the company had paid as upfront charges for the BWA airwaves. This refund is being made to breathe life back into MTNL and BSNL too. The refund will be used to bring down debt, which will be like a drop in the ocean as its debt stands at a gargantuan Rs.12,000 crore. Cash at hand is a petty Rs.110 crore. This refund if used to pare debt, will help bring down cost of debt by Rs.400 to 500 crore. Its interest outgo for FY13 was at Rs.1181 crore.