HDFC Mutual Fund plans to provide ₹500 crore liquidity to some of the fixed maturity plans (FMPs) with exposure to two troubled companies of Essel Group.
The liquidity arrangement would help HDFC MF redeem the FMP schemes that will be maturing in the next two to three months.
While mutual fund investments are subject to market risk, market regulator SEBI was irked by the fund house entering into a standstill arrangement till September with Essel Group to redeem the NCDs.
The fund house will now buy the NCDs issued by Essel Group subsidiary companies — Edisons Infrapower & Multiventures and Sprit Infrapower & Multiventures at the prevailing valuation as on the respective maturity or purchase date. The liquidity arrangement will apply to the FMP schemes with exposure to NCDs issued by Essel Group companies and that have matured in April or will mature during the standstill arrangement entered into by HDFC MF with Essel Group, said the fund house in a statement on Monday.
Provision of such liquidity arrangement would entail the acquisition of the NCDs issued by Essel Group subsidiaries and held by the FMP schemes at the prevailing valuation as on the respective maturity/purchase dates, it said. The liquidity arrangement would involve an outlay of ₹500 crore and would be put in place soon, it added.
Provision of the liquidity arrangement is without prejudice to the validity of HDFC MF’s action of entering into a standstill arrangement with Essel Group, it said. The liquidity arrangement is in the long-term interest of the fund house and is undertaken purely as a measure to provide liquidity to the relevant unit-holders, it added.
Earlier, HDFC MF had asked investors in FMPs to roll over their investments for better returns, rather than incurring loss due to default by Essel Group companies.