With continued market share and losses, it will be an uphill task for BSNL

Bharat Sanchar Nigam Ltd (BSNL) reported an improvement in revenues and balance sheet in FY23, but the company continues to lose market share to its rivals and its net and cash losses widened further during the year. In fact, the company’s net and cash loss widened in FY23 despite an improvement in its operating profit during the year.

The government-owned telecom operator’s net sales was up 13.8 per cent year-on-year (YoY) to Rs 19,128 crore in FY23, but its net losses were also up 17 per cent YoY to Rs 8,162 crore during the year. Similarly, its cash loss widened to Rs 2,503 crore in FY23 from Rs 1,674 crore a year ago. With this, the company has reported cash loss for six consecutive years (since FY 2018) and net loss for 14 consecutive years (or since FY 2010). As a result, it has posted a total of Rs 1.11 trillion in net losses in the past 14 years.

One of the reasons for the rise in BSNL’s net loss are the one-time expenses. For FY23, the net one-time expenses was Rs 1,500 crore. BSNL also got viability gap funding of Rs 16,200 crore in FY23.

Nonetheless, BSNL’s revenue share of the domestic telecom market also declined to all-time low 8.25 per cent in FY23 from 8.42 per cent a year ago. The combined net sales or income from operations of telecom operators (Jio, Airtel (domestic), Vodafone, BSNL, MTNL) was up 16.2 per cent YoY to Rs 2.32 trillion in FY23 from around Rs 2 trillion a year ago.

BSNL reported a decline in debt level and improvement in its leverage ratio last fiscal, thanks to capital infusion from the government of India. BSNL’s total borrowings were down 28.7 per cent YoY to around Rs 31,200 crore at the end of March this year, from around Rs 43,800 crore a year ago.

In contrast, the company’s net worth or shareholder’s equity was up 40.9 per cent YoY to Rs 62,966 crore at the end of March this year, from around Rs 45,000 crore at the end of March 2022. This was the first increase in BSNL’s net worth after a 13-year contraction.

The government infused fresh equity capital worth Rs 26,400 crore in the firm as part of its second revival package worth Rs 1.64 trillion for BSNL and its public sector sibling Mahanagar Telephone Nigam Ltd (MTNL).

As a result, its balance sheet improved — its gross debt to equity ratio improved to 0.5x at the end of March this year from 0.98x a year ago. Its net debt to equity ratio during the same period, improved to 0.45x from 0.91x a year ago.

Reduction in debt level also resulted in a 2.2 per cent YoY decline in its interest expenses to Rs 2,562 crore in FY23 from Rs 2,620 crore a year ago.

This coupled with a 64.7 per cent YoY increase in its operating profit in FY23 to Rs 1,559 crore led to an improvement in its interest coverage ratio (ICR) to 0.61x in FY23 from 0.36x a year ago.

However, despite this improvement, BSNL is still not in a position to fully service the debt from its operations and needs cash infusion. The company’s ICR should be consistently above 1.5x to enable it to service debt from the current year’s revenues and profits. business Standard