Ongoing problems for Franklin Templeton Mutual Fund seem far from over. Last week, the fund house announced that non-convertible debentures (NCDs) issued by Essel Infraprojects were unable to meet the maturity obligation. The fund house has also appointed a legal counsel and is actively considering all necessary actions to maximise recovery value.
Apart from Franklin Templeton MF, other fund houses such as HDFC MF and UTI MF have total exposure of Rs 143.93 crore in debt papers issued by Essel Group companies, as on April 30, 2020 shows data from Value Research. While Franklin Templeton MF had invested in Essel Infraprojects, HDFC MF has exposure worth Rs 7.25 crore in Edisons Infrapower and Multiventures and Primat Infrapower & Multiventures — both of which are Essel Group companies. Two schemes of UTI MF have investments worth Rs 44.34 crore in Zee Learn as in April-end.
Franklin Templeton MF said that these NCDs have a maturity value of Rs 616 crore but is currently valued at Rs 92 crore, which is 15% of maturity value after providing haircut of 85%. “These NCDs are backed by a pledge of listed shares of Zee Entertainment Enterprises, Dish TV India, unlisted shares of Essel Infraprojects, personal guarantee of Subhash Chandra and corporate guarantee,” said Franklin Templeton MF in its statement.
All the four schemes of Franklin Templeton MF that had exposure to Essel Infraprojects are currently under winding-up by the fund house. Last month, Franklin Templeton MF had announced winding up of six debt schemes due to the lower liquidity in the Indian bond markets for most debt securities and high levels of redemptions, following the novel Coronavirus outbreak and lockdown.
Other fund houses such as Kotak Mahindra MF, ICICI Prudential MF, among others, had exposure to debt papers by Essel Group companies, but these fund houses recovered their money in September last year. In November last year, Aditya Birla Sun Life Mutual Fund had created a segregated portfolio amounting to Rs 787 crore in Aditya Birla Sun Life Medium Term Plan, Aditya Birla Sun Life Credit Risk Fund and Aditya Birla Sun Life Dynamic Bond Fund because of default in payment by Adilink Infra & Multitrading Private Limited, which is an Essel Group Company.