After IL&FS crisis, MF investments could be singed by exposure to Zee

The mutual fund (MF) industry is bracing for fresh trouble with its exposure to Zee Group shares. It also has exposure of about ₹7,275 crore of the company’s debt papers. This comes even as MF players are facing heat from their exposure to the debt laden IL&FS Group.

Aditya Birla MF’s debt exposure in the form of loans against Zee Group shares was to the tune of about ₹2,700 crore while those of HDFC Mutual Fund and Franklin Templeton were about ₹1,200 crore and ₹1,000 crore respectively.

SBI Mutual Fund and Baroda Pioneer Mutual Fund had investments of ₹506 crore and ₹500 crore, respectively. Reliance Mutual and Kotak Mutual Fund had exposures of ₹430 crore and ₹134 crore while that of DHFL Pramerica was ₹55 crore.

Though these fund houses’ exposure to Zee Group may seem small against their fund sizes, conservative MF investors are concerned about the future ability of the MF firms to protect their investments, with the possibility of successive writedowns after the IL&FS fiasco.

Direct investment

This apart, most of the MFs have invested about ₹1,800 crore directly in shares of Zee Entertainment Enterprises as it is part of Nifty index.

The last straw on the Zee front came when its promoter Subhash Chandra, in a public statement, said: “For the first time in my career of 52 years, I am compelled to apologise to our bankers, NBFCs and mutual funds, since I believe that I have not lived up to their expectations despite the best of my intentions.

“I am extremely certain that there is no promoter in India Inc who has dared to sell the jewel of his crown to pay off the liabilities. While the process is still ongoing, there are some forces which are not willing to see us succeed. That said, I am not indicating that there are no mistakes done from my end, and as always, I am willing to face the consequences of the same. I assure you, that I am not running away from the core issue and will do my best to repay each and every person. The best time for the same, however, is difficult to be mentioned at this stage.”

According to the BSE website, ₹7,580 crore worth of Zee Entertainment shares have been pledged. This is nearly 60 per cent of the value of the promoter’s stake. The 32 per cent fall in the stock price led to the creation of fresh pledges on Friday.

Mutual funds and NBFCs also hold promoters’ pledged shares of Zee Group companies such as Dish TV India, Zee Media and Zee Learn, which had fallen between 10 per cent and 33 per cent in Friday’s trade.

“The letter by the Group Chairman over the weekend could trigger fresh selling in Zee Group stocks. The stock could come under more pressure if MFs and NBFCs start selling the pledged shares,” said an analyst.

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