Kotak Mahindra Mutual Fund (Kotak MF) has said that it may not be able to fully redeem the investments in two series of its fixed maturity plans (FMP) that fell due on April 8 and 10.
This is due to delay in recovering money invested in the non-convertible debentures of Edisons Utility Works Pvt. Ltd. and Konti Infrapower & Multiventures Pvt Ltd., both part of the Essel-Zee group.
The debentures are secured by equity shares of Zee Entertainment Enterprises Ltd.
In a letter to its investors, Kotak has said that it is working for ‘optimal recovery’ from the two companies and any such realisation would be proportionately shared with them. An FMP is a close-ended scheme that invests in debt instruments whose maturity matches the tenure of the scheme.
Kotak FMP series 127 and 183 that matured on April 8 and April 10 have exposures of around 18% and 19% to the two companies.
Kotak MF invested the money under the schemes in debt securities, money market instruments and government securities.
“The share price of Zee had seen steep fall on 25th January 2019. This has resulted in breach of top-up covenants,” the communication said. The promoters of ZEEL — the Essel group — is working for resolution of the above through a strategic sale of Zee in a time-bound manner. The resolution is likely to be achieved by September 30, 2019, Essel Group had said.
Impact on NAV
“As on 29th March 2019, the scheme (series 183) had 19.24% of AUM invested in papers of Konti and Edisons. If we assume that amount invested in Edisons and Konti NCDs is not realised by the maturity of FMP as mentioned above, the effect of the same will be reflected in NAV of scheme on the date of maturity,” the communication from Kotak AMC said.
‘Hopeful of recovery’
“We are working for optimal recovery from Konti and Edisons for the benefit of unit holders and are hopeful that such recovery will happen albeit with little delay. Any realisation from said investments, will be shared proportionately with the unit holders subsequently,” it said. The two schemes had also invested in the debentures of IL&FS Transportation Networks for which full provision had been made as recovery was uncertain and would be dependent on the resolution plan framed by the new board and the NCLT, said a Kotak AMC spokesperson.
HDFC MF extends
Meanwhile, HDFC MF announced the extension of its fixed maturity plan — Series 35 — a close-ended scheme due for maturity on April 15, by 380 days.
“The purpose of the roll over/extension is due to current interest rate scenario and portfolio positioning, the yields prevailing in the short maturity bucket present an option for investors to lock-in their investments at current prevailing yields,” HDFC MF said.