Fixed maturity plan crisis: Five MFs to take call on redemption in 3 months

Suresh P Iyengar Mumbai | Updated on April 15, 2019 Published on April 11, 2019

The crisis in the mutual funds industry seems to have just begun with six fund houses having exposure to the troubled debt papers issued by the Essel Group and IL&FS companies waiting to take a call on how to handle the redemption of fixed maturity plans (FMP) in the next three months.

These fund houses may either withhold returns or offer investors an option to roll over their investments.

Unlike Kotak Mutual Fund which withheld the returns of its close-ended FMP that matured on April 10, HDFC MF offered an option to the investors of its FMP maturing on April 15 to roll over their investment for 380 days.

FMPs of five mutual funds — Reliance, Aditya Birla Sun Life, DSP MF, UTI MF and DHFL Pramerica — with exposure to distressed Essel and IL&FS group companies will mature in the next two months.

Of the FMPs with exposure to the two troubled companies, 56 schemes are maturing this year. Among them, 45 have exposure to the Essel Group and 11 schemes have invested in IL&FS.

The schemes that are maturing in April include four schemes of HDFC MF, three each of Kotak MF and UTI MF, and one scheme of DSP MF.

Similarly, two schemes each of Kotak and HDFC MF and six schemes of Reliance MF are maturing in May, while one scheme of UTI MF is maturing in June.

As of last December, mutual funds had exposure worth ₹8,000 crore in the debt securities of the Essel group companies, according to data from Morningstar. Of this, ₹1,673 crore was held by FMPs and the balance by open-ended schemes.

Zee group’s assurance

Meanwhile, addressing investors concern, the Zee Group, in a statement issued on Thursday, highlighted its arrangement with lenders, including Kotak Mahindra AMC, and assured that repayment along with interest will be made to every lender as per the agreed timeline of September.

“While the Essel Group cannot comment on the arrangement between Kotak Mahindra AMC and its investors, we remain committed to achieving resolution with the sole objective of saving loss of public money and repayment to every lender,” it said.

Published on April 11, 2019
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