HDFC MF recently received two show-cause notices by SEBI.
In a disclosure to stock exchanges the fund house said that it received the notices on May 10 in relation to its investments in Essel Group companies. The fund house had extended loan against shares to two entities under Essel Group.
Morningstar data shows that six fund houses had exposure to Essel Group companies in their FMPs as on December 2018. With Essel Group facing debt woes, lenders had agreed to extend its repayment period till September.
This proved to be a challenge in case of FMPs maturing before September. While HDFC MF rolled over its FMP maturing in April, Kotak MF offered partial redemptions. Reliance MF meanwhile did not agree to the extension and sold off Essel shares on May 8.
As per SEBI regulations, FMPs can only invest in securities maturing on or before their maturity date.
HDFC MF in its filing to stock exchanges said, “We are working with our legal advisors and are in the process of responding to the said show-cause notices.”
