The Four Mutual Funds That Retain Faith In Subhash Chandra’s Essel Group

Aditya Birla Sun Life Mutual Fund, HDFC Mutual Fund, ICICI Prudential Mutual Fund and Franklin Templeton Mutual Fund together have close to Rs 1,735 crore worth of exposure secured by shares of Zee companies, according data provided by industry executives who didn’t want to be identified as the information is not public. By comparison, Essel Group’s share-backed debt with mutual funds, according to people in the mutual fund industry, stood at Rs 4,600 crore at August-end.

The shares with the four asset managers cover one time the debt, against the required 1.5 times. And the fund houses remain invested even as Zee Entertainment tumbled 11.36 percent on Monday, the biggest fall since the up to 37-percent slide in group stocks in a single day in January. At the time, mutual funds had agreed not to sell shares offered as collateral against non-convertible debentures till the end of September.

Essel Group, in all, needed to repay asset managers and non-bank financial companies Rs 11,000 crore within the deadline. Of this, mutual funds held Rs 6,606 crore as of August end, according to Morningstar. That included Rs 4,600-crore debt backed by shares and Rs 2,000-crore borrowings tied to toll collections and receivables from the state-run NHAI, according to an industry executive. Of the exposure secured by assets, the person said Aditya Birla and Franklin Templeton mutual funds held close to Rs 1,600 crore.

The Essel Group recently paid lenders nearly half of the Rs 11,000-crore debt—or Rs 4,450 crore—after selling stake in Zee Entertainment Enterprises to Invesco Oppenheimer and divesting 200-megawatt solar farms. It has lined up more asset sales.

Some fund houses extended the deadline till March to help the group realise the of its assets, including roads and renewable energy units, BloombergQuint reported earlier. But not all asset managers agreed.

On Monday, Kotak Mutual Fund and SBI Mutual Fund sold the pledged shares through their trustee Catalyst Trusteeship Ltd. They together offloaded 72.5 lakh shares at Rs 281.75 apiece, according to Bulk deal data on the NSE. NSE data didn’t disclose the name of the buyer. The two asset managers, which owned shares as a collateral against debt worth Rs 450 crore as on Aug. 31, received a combined Rs 204.3 crore.

Kotak Mutual Fund, after having closed some of its fixed maturity plans with exposure to Essel Group in April-May this year, had promised its investors to pay up the invested amount by September-end, a person aware of the development told BloombergQuint on the condition of anonymity. Shares of Zee Entertainment were sold to recover all dues including interest accrued till date, he said.

A spokesperson for Kotak Mutual Fund declined to comment. SBI Mutual Fund has yet to respond to an emailed query.

Essel Group on Wednesday confirmed that its lenders have unanimously agreed to extend the timeline, enabling the group to optimise the output from the sale of its assets. “The lenders have extended complete support to the group and its promoters, recognising the intrinsic of the assets and the overall asset divestment process undertaken. The group remains confident on further divestments, including its non-media assets,” it said in a statement.