decline of the firm

Declining revenue; no earnings; increasing losses; eroding equity; and increasing debt. If this is the story over the last five years, it should be reasonable to presume that either the business itself is lousy, or managers are not able to take the right decisions, or may be both. Such a situation should only result in destruction of value for the shareholders. 

And who are these shareholders? The government owns 56.25% and Life Insurance Corporation owns 18.81%, may be a forced buy for LIC. It is LIC's Fortune Plus Secure Funds that owns the shares of this firm; however, there is neither fortune nor secure in this investment.

What was selling for Rs.78 b in 2009 is now available at less than Rs.10 b.

While the broader market increased.

It is difficult to understand why the firm had to reinvest in its business; over the last five years, it has spent about Rs.87 b as net capex. It is not tough to realize that competition is killing its business.

The best thing to do in this situation is to gradually withdraw from the market or make an outright sale. The first claim on this value would go to the lenders; they cannot get their full Rs.115 b, though, unless the government decides to make payments out of the tax payers' money.

The current year to date performance is consistent with prior periods; it seems there are far too many problems for the firm. When the book value of debt is Rs.115 b and market value of equity is Rs.9.73 b, there isn't much left for the shareholders.

Yet, here's a buy recommendation for MTNL. By the way Sharekhan owns 1.19% of this business.