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HDFC MF weighs paying partial proceeds to fixed maturity plan investors

mutual funds
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HDFC Mutual Fund (MF) on Monday said it is considering paying investors partial proceeds on maturity of the their fixed maturity plans (FMPs).

The fund house had earlier extended the maturity of one of its FMPs, which had about 20 per cent of its assets exposed to debt papers of two Essel group companies — Edisons Infrapower & Multiventures and Sprit Infrapower & Multiventures.

According to industry sources, a fund house typically takes investor feedback before proposing the option of an FMP roll-over. “It is possible that not all investors are okay with rolling-over of the FMPs,” said a senior official of a fund house, requesting anonymity.

“In the case of a roll-over, investors opting to exit would have no access to a possible recovery of the dues,” he added.

Data from Value Research shows HDFC MF has eight FMPs that would mature before September, which is the deadline lenders have set for debt-laden Essel group companies. These FMPs had Rs 419 crore of exposures to Essel group entities on March 31, 2019.

Overall, close to two dozen FMPs of different fund houses will mature before September, with over Rs 900 crore of investor money exposed to Essel group entities, shows data from Value Research.

On the option of paying out part-proceeds to investors on the stated maturity date, HDFC MF said, “Unit holders will receive the maturity proceeds on the due date of maturity of the FMPs excluding the value of debt exposures to the Essel group. The residual amount of the proceeds pertaining to Essel group exposure would be paid on the receipt of dues from the group.”

However, the fund house added that it could opt for extending the maturity of the FMPs, depending upon which of the two options seem more appropriate.

According to sources, the Securities and Exchange Board of India (Sebi) is closely monitoring the situation and has sought details from fund houses on their FMP exposures to the Essel group. Sources add that the regulator is also examining under which provisions fund houses have taken different approaches in dealing with investor money stuck in the FMPs due to exposure to Essel companies.

Earlier, HDFC MF rolled-over an FMP that was to mature on April 15, while Kotak MF said the fund house would make part-payment on maturity and the rest will be paid on recovery from Essel exposures. Both fund houses have reiterated that the decisions are being taken in the best interests of unitholders and for optimal recovery of exposures to Essel entities.

Most of the mutual funds, along with other lenders, earlier in the year entered into a ‘standstill’ agreement with promoters of Essel companies to not sell the group’s collateral shares till September. The promoters have assured that they would be able to finalise a strategic stake sale by September, which would help them settle their dues.

Source: Maalaimalar