Following a delay in recovering investments made in Essel Group, HDFC AMC had extended the maturity date of its fixed maturity plans, which have exposure to Essel Group securities
HDFC Asset Management Co. Ltd said the decision taken by lenders to provide additional time to Essel Group promoters to complete the ongoing strategic sale was in the best interest of investors. "This is an unprecedented situation and we are acting to the best of our judgement keeping in mind the interest of unitholders," said HDFC AMC in a notification dated April 15.
Following a delay in recovering investments made in Essel Group, HDFC AMC on April 11 said that it had extended the maturity date of the fixed maturity plan (FMP) Series 35 to April 29, 2020, from April 15, 2019.
HDFC AMC's exposure to Essel Group companies stood at Rs 1,156 crore as of March 30, 2019, the company said. HDFC MF has the minimum security cover of 1.5x (secured by Zee Entertainment shares only) or 1.75x (secured by Zee as well as Dish equity shares).
Based on closing share price as on April 11, 2019, the security cover across HDFC MF’s schemes is in the range of 1.4x to 1.8x, noted the fund house in the notification.
FMPs Maturing Before September 30
HDFC AMC will give two options to investors in the FMPs with exposure to Essel Group maturing before September 30.
The FMPs may be rolled over, and the investors who do not want to opt for rollover can redeem their units at prevailing NAVs (net asset value). The valuation of the Essel Group securities will be decided based on the valuation provided by the Association Mutual Funds in India (AMFI) approved independent valuation agencies as on the date of redemption.
In the second option, the investors will receive the maturity proceeds on the due date of maturity, excluding the value of debt exposures to Essel Group. The rest of the maturity proceeds pertaining to Essel Group exposure would be paid on receipt of the dues from the group.
Essel Group Woes
Shares of Zee Entertainment, a unit of Subhash Chandra-owned Essel Group, plunged sharply following reports that pledged shares of promoters were invoked and sold. Essel Group, which has been struggling with high debt, had defaulted on some of the repayments in January.
HDFC AMC said a meeting was held between the promoters and lenders, and it was agreed to provide additional time to promoters to complete their ongoing strategic sale plan of Zee shares.
The Essel Group is reportedly in talks with Sony Entertainment to sell its stake in Zee Entertainment. The sale is expected to complete by September 30.
HDFC AMC noted that the financial issues are related to the promoter level debt only. Zee's business and financials continue to remain robust and healthy, and, with a strong intrinsic value, it could be an attractive potential acquisition target, added the company.
First Published: IST