Mumbai: The risk related to debt instruments has hit the fund houses. This came to light after Kotak Mahindra Asset Management Company (Kotak Mahindra AMC) and HDFC Asset Management Company (HDFC AMC) deferred in payment to their investors. Both were hit by its exposure to Zee Group. While Kotak informed its investors that it is partially withholding one its fixed maturity plans (FMP) redemption, HDFC has rolled over its scheme by 380 days. A source close to investment process, said, “If they are unable to honour FMPs, then the point of such schemes are redundant.”
Apart from Kotak and HDFC there are others that have exposure to Zee. According to ICRA, MF industry’s exposure to Zee Group is estimated to be Rs 7,000 cr. Of which Kotak has Rs 372 cr and HDFC Rs 1,152 cr. Aditya Birla Sun Life AMC tops the list with Rs 2,588 crore. Harsh Roongta, investment advisor, said, “This is not the first time such risks have emerged. In 2008-2009, this has happened. With schemes like FMPs, there are risks as there are high returns as well.”
Another source said that this is termed fixed maturity plans but no fund manager gives in writing that there will be fixed returns. FMPs are attractive as they are sold as a scheme with lucrative post-tax returns. Mitul Budhbhatti, Associate Director, CARE said, “MFs have done well over the past few years. With this incident, investors are reminded that instruments like debt also has risk. That does not mean there will be a dent in the popularity of MFs.” He added one can expect SEBI to come with a robust mechanism to solidify fundamentals.