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Kotak Mutual Fund’s Nilesh Shah reassures investors

Shah explained the rationale behind the fund house’s decision to allow Essel Group more time to pay the money back.

ET Online|
Apr 12, 2019, 12.57 PM IST
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Nilesh Shah, CEO, Kotak Mutual Funds, has written to mutual fund distributors that the fund house has taken actions which it believes was in the best interest of unitholders. He also said that the decision was taken after consultation with `majority of lenders who collectively had more than Rs 13,500 crore exposure to Essel Group promoters.’

Mutual funds had an exposure of Rs 7,500 crore to the group which is widely referred to as Zee Group. NBFCs had an exposure of Rs 4,000 crore, and overseas lenders Rs 2,000 crore to the troubled group.

In a note that started with 'there have been many articles in the media about Kotak FMP,’ Shah explained the rationale behind the fund house’s decision to allow Essel Group more time to pay the money back.

He said the fund house had two choices: One, sell the shares and risk sub optimal recovery or extend time for a shot at full recovery. Second, to roll over the FMP or Pay majority of money due and withheld some part.

“We took the call of paying back majority of money to unitholders on maturity and allowing time to Essel Group promoters to pay back our dues,” he said.

He also said, “I would like to reassure you that this and similar kind of securities are invested only in the funds which are mandated to take higher yield assets which are popularly known as credit risk funds or high yield FMPs.”

The note ends with him asking for the support of distributors: “looking forward to your support in allaying any concerns which your investors may have.”
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