Aditya Birla Sun Life Mutual Fund has side-pocketed an investment of ₹793 crore made in the Subhash Chandra-promoted Essel Group company Adilink Infra & Multitrading as it had defaulted on a payment on Monday.
Among the mutual fund schemes that had an exposure to Adilink Infra are Aditya Birla Sun Life Medium Term Plan with ₹419 crore, Aditya Birla Sun Life Credit Risk Fund with ₹213 crore, and Aditya Birla Sun Life Dynamic Bond Fund with ₹161 crore.
The unrated non-convertible debentures of Adilink mature in March. Birla Mutual Fund holds 98.65 per cent of the debentures and the remainder is held by another minority investor.
Side-pocketing is a process wherein the investment in the stressed asset is spun off separately and its value is written down. On recovery of the money, investors holding the units of the stressed assets will get their money.
On November 25, payment from Adilink was due to a minority investor as he had exercised a put option. “It has come to our knowledge that the issuer has not repaid the minority investor. We consider it a credit event and propose to create a segregated portfolio for the Adilink exposure,” said Birla MF in a statement on Tuesday.
Segregated portfolio
Following this, existing investors in the schemes will be allotted an equal number of units of the segregated portfolio as held in the main portfolio. Upon recovery of money, it will be distributed to the investors in proportion to their holding in the segregated portfolio, said the fund house.
No subscription and redemption will be allowed in the segregated portfolio while investors can redeem their units based on the net asset value of the main portfolio and hold the units of the segregated portfolio separately. The NAV of the segregated portfolio will be announced separately.
The repayment of the Adilink NCDs is expected to be done through monetisation of its road assets that are pledged to Birla Mutual Fund as security, it said.