Sebi issues notices to Kotak MF, HDFC MF over exposure to Essel

The Securities and Exchange Board of India (Sebi) has sent show-cause notices to Kotak Mutual Fund and HDFC Mutual Fund, seeking details about their investments in the debt instruments of Essel Group companies. Essel Group promoters have sought time to repay their lenders.

Both fund houses had exposure to Essel Group companies in their fixed maturity plans (FMPs). Both had come under the spotlight last month as they were not able to make full repayment to their FMP investors on account of these investments.

While HDFC MF, as a listed entity confirmed the development on exchanges, an e-mail query sent to Kotak MF didn’t elicit any response.

HDFC MF stated: “We wish to inform that the company is in receipt of two show-cause notices from Sebi dated May 10, 2019, in relation to the investments of the FMPs of HDFC MF in debt instruments of Essel group companies."

Most MFs with debt exposures to Essel Group had entered into a standstill agreement with the promoters, which effectively extended the maturity of these debt papers to September.

As of March 31, 2019, 16 FMPs belonging to HDFC MF and Kotak MF were maturing before the extended timeline given to the Essel group promoters, Value Research data showed.

Securities and Exchange Board of India ( SEBI )