Uncertainty over EPFO’s Rs 11,000-crore investment in corporate bonds

By: |
November 12, 2021 4:46 AM

The retirement fund body bought securities worth Rs 1,873.84 crore issued by IDFC First Bank between July 2010 and May 2015. In Indiabulls Housing, EPFO had a total exposure of Rs 1,600 crore as on September this year.

EPFO acquired bonds worth Rs 4,300 issued by Yes Bank between December 2015 and October 2017.EPFO acquired bonds worth Rs 4,300 issued by Yes Bank between December 2015 and October 2017.

Around Rs 11,000-crore investment made between 2010 and 2017 by the Employees’ Provident Fund Organisation (EPFO) in corporate bonds is a cause for concern for the body as the issuers have either defaulted on paying principal and interest obligations or the securities have been downgraded.

While IL&FS and Reliance Capital have defaulted on paying principal and interest obligations totaling to Rs 868 crore, as on September this year; securities issued by Yes Bank, IDFC First Bank and Indiabulls Housing have been downgraded between May 2019 and February 2020.

The EPFO held securities worth Rs 574.73 crore in IL&FS, but the company under resolution, has defaulted on paying Rs 384.12 crore as principal and interest till September this year. EPFO is mulling to take the legal route to recover money and protect the interest of its subscribers.Its Rs 2,500-crore exposure in Reliance Capital is a bigger worry for the EPFO. As on September this year, Reliance Capital has defaulted on paying interest and principal, amounting Rs 484 crore.

“EPFO has issued reminders to ministry of corporate affairs (MCA), RBI, Sebi and ministry of finance for taking appropriate action for initiating insolvency and bankruptcy proceedings (against Reliance Capital) and such other actions necessary for protecting the interests of EPFO and its subscribers,” EPFO said.

In a communique to the members of the Central Board of Trustees (CBT) ahead of their scheduled meeting on November 20, EPFO has also said that it has requested the ministry of labour and employment (MoLE) to guide if criminal complaint against Reliance Capital can be initiated.

EPFO acquired bonds worth Rs 4,300 issued by Yes Bank between December 2015 and October 2017. The retirement fund body bought securities worth Rs 1,873.84 crore issued by IDFC First Bank between July 2010 and May 2015. In Indiabulls Housing, EPFO had a total exposure of Rs 1,600 crore as on September this year.

Though there has been no default on the part of Yes Bank, IDFC First Bank and Indiabulls Housing Finance; rating downgrade of these securities by different agencies is a cause for concern for EPFO and its subscribers. There is, however, another instance of default in the case of DHFL. EPFO had holding worth Rs 1,161.8 crore in it, as on August 31; but the NBFC defaulted on Rs 600.3 crore on principal payment and Rs 160.39 crore as interest payment.

Meanwhile, DHFL went through a corporate insolvency resolution process and as per the resolution plan, EPFO received, as on September 29, Rs 249.25 crore in cash and securities with a face value of Rs 299.45 crore. “Total amount invested (in DHFL) but not received as on September 30 is Rs 613.07 crore and the amount of interest due but not received is Rs 160.39 crore,” EPFO said.

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