Kotak Mutual Fund may not return the full investment amount to investors of Kotak FMP Series 127 and Kotak FMP Series 183. Kotak FMP Series 127 matured on April 8 while Kotak FMP Series 183 matures today.
These schemes had invested in two Zee Entertainment Enterprises Ltd. (Zee) backed NCDs - Konti Infrapower & Multiventures Pvt. Ltd. and Edisons Utility Works Pvt.Ltd.
While the fund house holds shares of Zee as collateral, it has agreed to refrain from selling these stocks till September 30. Earlier, lenders and mutual funds have issued a moratorium to Zee to repay the investments until September 30.
The fund house said that the scheme would hold a portion of these FMPs having exposure to Essel group until it recovers the dues. However, the fund house would settle the remaining proceeds.
As per March 2019 portfolios uploaded on Kotak MF’s website, Kotak FMP Series 127 has 17.97% combined exposure to Konti Infrapower & Multiventures and Edisons Utility Works while Kotak FMP Series 183 has 19.25% exposure.
In a statement shared with Cafemutual, Rohit Rao, Chief Communication Officer, Kotak Mahindra Group said, “The 3- year FMP scheme, which matures in April-May 2019, has invested in debt securities, money market instruments and government securities. Amongst other investments, the scheme also invested in Non-Convertible Debentures (NCDs) issued by Edisons Utility Works Pvt Ltd and Konti Infrapower & Multiventures Pvt Ltd (both are Essel Group companies – secured by equity shares of Zee Entertainment Enterprises Limited) and IL&FS Transportation Networks Limited (Credit Enhancement by Parent Support Agreement of IL&FS). The three firms are facing headwinds due to company and sectoral-specific issues. We are working closely with the Essel Group for optimal recovery from Konti & Edisons for the benefit of our unit holders and believe that such recovery will take place albeit with some delay. For IL&FS Transportation Networks, Kotak Mutual Fund has made a 100% provision for this investment as the company has been classified in the red category where recovery is uncertain and will be dependent on the resolution plan achieved by the new board / NCLT.”
Apart from these FMPs, the fund house has four other FMPs, which have exposure to these securities and are maturing in April and May. Kotak FMP Series 187 – 21.01% exposure and maturing on April 15, Kotak FMP SERIES 189 – 10.10% exposure and maturing on April 17, Kotak FMP Series 193 – 10.89% exposure and maturing on May 2 and Kotak FMP Series 194 – 11.54% exposure and maturing on May 15. It is uncertain whether the fund house will follow the same strategy for these FMPs too.
The maturity dates are as per Value Research while the exposure values have been calculated using monthly portfolio data uploaded on Kotak MF’s website.
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