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  • MF News Kotak MF assures investors of repaying FMP proceeds after recovering Essel dues

    Kotak MF assures investors of repaying FMP proceeds after recovering Essel dues

    The fund house expects to receive the dues from Essel Group companies by September 30.
    Shreeta Rege Apr 11, 2019

    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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    5 Comments
    Dipesh Sethia · 4 years ago `
    Not able to understand, how these things are happening even after having such a active and good fund management team. Sometimes I force to think it's a fate game.
    Rickey Dharmani · 4 years ago `
    Its pathetic to see this state in the past one year all that the governing bodies have done is just play around like a fool with the TER , not focusing at all at on ground realities . The number of defaults that have happen in the past 6 months proves that in todays scenario any body can fool the goverment .Hence they are worried about the commissions.
    Pankaj Kapadia · 4 years ago `
    FMP means Fixed Maturity Plan. On maturity investor is expected to get back the money. Since Kotak does not know what is the amount which they can remit to the investor because of possible partial default they will create units of such amount and pay the rest. (side pocketing legally allowed).
    Only regrets are that Kotak has not informed as how much they are paying per unit for each of those fmps and how much are trasferred to those doubtful recovery scheme. Please let me reiterate ..." mutual fund investments are subject to makret risk.". Another issue is how do I file return and what capital gains shall I assume. Only HNI would have invested in this schemes and transparent and responsible statements are expected from Kotak
    Gurram Ranjeeth · 4 years ago
    Side pocketing can be done only after paper becomes default now the issue is Essel was not a default they have asked not to sell till sept 30.
    Reply
    Mfg · 4 years ago `
    Here's the harsh truth though, not much would be expected from this since like politics, perception sells here more than reality. We will keep seeing more push to reduce IFA commission and promotion for direct schemes but not enough for how Fund Houses are practicing. May be if the regulator paid similar attention to ground realities then may be, just may be the reality would be a lot more respected
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