After Kotak FMP unit holders failed to get back their total money with interest in case of Series 127, Lakshmi Iyer of Kotak Mahindra AMC said that the fund house intends to return the principal as well as the accrued interest at the earliest. Notably, according to the portfolio\u2019s disclosure of Kotak FMP Series 127, it has investments worth Rs 80 crore in Konti Infrapower & Multiventures and Edisons Utility Works, two Essel group firms. The total assets of the schemes as on February stood at approximately Rs 450 crore. Lakshmi Iyer, (Debt) & Head of Products, Kotak Mahindra AMC reiterated that the fund house has given time to Essel group to resolve the issues by September 30th. We take a closer look at the implications for the investors. Portion relating to Essel Group to be repaid at the earliest \u201cThe portion of investment relating to Essel group has been retained in the fund, and will be returned to the unit holders along with the accrued interest on or before September 30th, as per what we have communicated to the unitholders,\u201d Lakshmi Iyer, CIO (Debt) & Head of Products, Kotak Mahindra AMC said in an interview to ET Now. Explaining as to why the fund house chose not to sell the shares to recover the money, Iyer said that it wouldn\u2019t have guaranteed full recovery, and the decision was taken keeping unitholders interests in mind. No guarantee of returns in case of FMPs \u201cOpen-ended and closed ended schemes don\u2019t come with guaranteed returns,\u201d Iyer explained, adding that Kotak is engaging with the group, and there is intrinsic value in the firm (Essel Group). \u201cThey have told us that they will need time to complete the stake sale. The stake will then come to the promoters, of that proceeds, the debt will be repaid to us,\u201d she noted. \u00a0If the strategic sale is consummated by September 30th, and Kotak MF receives the money, the amount will be returned to the unit holders-both the principal as well as the accrued interest. Risks in investing in FMPs While investing in these fixed income products, the investors must take cognisance of the risks. There are three types of risks in fixed income products- interest rate risk, credit risk and liquidity risk. \u201cIn a fixed maturity plan- the interest rate risk is almost mitigated, as the assets are almost locked till the maturity date,\u201d Iyer said. However, the credit risk has remained live. \u201cIt boils down to the quality of the portfolio,\u201d she added. In this specific case, it is a liquidity issue, which will be resolved with time, Iyer said. It is a case where we have the hard collateral, but we need to give them time to resolve the issue.