HDFC MF to buy Rs 500-crore NCDs of Essel Group from its debt schemes
Mutual funds collectively held Rs 7,000 crore worth of Essel papers.
The fund house, in a disclosure to stock exchanges late Monday evening, said it will repay investors in fixed maturity plans (FMPs) that hold Essel-issued securities and are due for maturity until September. The move removes uncertainty among investors, who were concerned that they might not get back their entire investments in case the Subhash Chandra-controlled group failed to sell some of its assets and repay lenders before September.
Late January, asset managers including HDFC MF had agreed not to sell shares of Zee Entertainment they held as collateral and gave time to Essel until September to repay debts. Mutual funds collectively held Rs 7,000 crore worth of Essel papers. HDFC Mutual Fund had exposure to Edison Infrapower and Sprit Infrapower in its portfolio.
“This liquidity arrangement shall only apply in case of FMP schemes (having an exposure to the NCDs issued by the Essel Group), which have either already matured in the month of April, 2019 and/or will mature until the standstill arrangement entered into by the company with Essel Group is in force,” the asset manager said in a statement to the exchanges.
In April, when some FMPs of Kotak and HDFC mutual funds came up for maturity, HDFC had rolled over one of its FMP by 380 days, while Kotak Mutual Fund repaid investors minus their holdings in Essel Group companies. The move did not go down well with the Securities and Exchange Board of India, which questioned the legal standing of the agreement between mutual funds and Essel.
Earlier this month, the capital market regulator sent legal notices to Milind Barve, managing director of HDFC Mutual Fund, some top officials and HDFC Trustee Co for extending the maturity of its FMP because of Essel Group’s inability to repay. In May, Sebi had issued separate show cause notices to HDFC Mutual Fund and Kotak Mutual Fund seeking details of the terms of their investments in Essel Group’s debt securities.
While at least eight fund houses hold Essel papers in various schemes, Sebi sent show cause notices to two fund houses because their FMPs came up for maturity.