MF investors scare, as Kotak FMP defers payment

The mutual fund investors in the country are facing a scare as one of the Kotak Asset Management’s fixed maturity plan (FMP), that matured on the April 8, is seen as deferring the payment to investors.

The delay in the repayment to the investors came on the back of the asset manager not able to collect payments from three stressed firms.

In a recent note to investors of Kotak FMP Series 183, the company said that almost 27% of the scheme corpus of Rs 457 crore is invested in three troubled entities facing severe liquidity crisis: IL&FS Transportation Networks Limited (ITNL), and two Essel Group companies (Edisons Utility Works and Konti Infrapower & Multiventures).

FMPs are close-ended funds that invest in debt instruments with maturity matching the tenure of the scheme.

The FMPs of mutual fund industry have an estimated exposure of over Rs 7,500 crore to Essel Group debt papers. Of this, 55 close-ended FMPs have over ₹1,700 crore maturing over the next three months.

Investors are worried that two FMPs of Uday Kotak-owned mutual fund maturing later this month could face the same fate. The two FMP series – 187 and 127 – that are maturing this month has cumulative Assets under Management (AUM) of Rs 951 crore and exposure of Rs 186 crore to the Subhash Chandra owned Zee Group.

Other than this, six FMPs of Kotak Mutual Fund with AUM of Rs 2,094 crore maturing in the next one month have invested Rs 358 crore in the debt papers issued by the Zee Group.

On the other hand, the country’s largest fund house HDFC Asset Management Company has extended an FMP that was supposed to mature on April 15 to April 29, 2020, as the liquidity crunch continues to cripple the market.