There is good news for investors who had parked money in MF schemes having exposure to Vodafone Idea Ltd (VIL). Such schemes had to side pocket their exposure to VIL after the telecom company was downgraded below investment grade.
Three fund houses have received payments from Vodafone Idea on June 12 and their affected schemes will be crediting the payment to investors’ accounts soon.
Among such schemes are Franklin Templeton India MF’s 6 debt schemes that are currently under winding up process. These 6 debt schemes - Franklin India Ultra Short Bond Fund, Franklin India Low Duration Fund, Franklin India Short Term Income Plan, Franklin India Credit Risk Fund, Franklin India Dynamic Accrual Fund and Franklin India Income Opportunities Fund - have received Rs 102.7 crore as interest payment from VIL on June 12.
Other fund houses include UTI MF that has received Rs 13.2 crore. Nippon India MF, which had segregated the securities of VIL held in Nippon India Hybrid Bond Fund, also received Rs 9.3 crore. Further, Nippon India MF said in a note that it remains optimistic about the remaining payment from VIL.
UTI MF and Nippon India MF had side pocketed their exposures to Vodafone Idea on February 17 after the telecom company was downgraded by Care Ratings to below investment grade. Franklin India MF had initially marked down their investment in VIL to zero on January 16 and then created segregated portfolio the next week.
Side-pocketing is a practice in which fund houses can segregate risky assets from the rest of the holdings and cap redemptions. Simply put, fund houses can create two funds in an existing fund - one with risky assets where fund house will not allow redemption expecting recovery from stressed assets and another fund with other assets with existing features. Investors redeeming their units in main portfolios will get redemption proceeds based on the NAV of main portfolios and will continue to hold the units of segregated portfolios.
