These Mutual Funds Have Invested In Anil Ambani Group Promoter Debt
Franklin Templeton Mutual Fund has the highest exposure among asset managers that have agreed to a standstill with Anil Ambani promoter group companies if the value of pledged shares falls below the required level.
The mutual funds and lenders agreed not to sell pledged shares till Sept. 30 even if the value of the collateral cover falls, a company executive told BloombergQuint on the condition of anonymity as he is not authorised to speak to the media. The group companies will pay the principal and interest to lenders on scheduled dates, the executive said.
The standstill relates to the collateral offered for Rs 1,225-crore non-convertible debentures issued by Ambani’s two privately held promoter entities, Reliance Big Pvt. Ltd. and Reliance Infrastructure Consulting and Engineers Ltd. Reliance Big had raised Rs 575 crore while Reliance Infrastructure Consulting had borrowed Rs 650 crore, according to a note by Brickworks Ratings.
Disclosures by asset managers show that nearly all those NCDs of the two companies were held by three mutual funds as of January end. Franklin Templeton Mutual Fund contributed nearly 90 percent, followed by DHFL Pramerica Mutual Fund and Indiabulls Mutual Fund. Based on publicly available information, these are the only funds with exposure to the debt of two Ambani group promoter entities.
Mutual Fund Exposure
Franklin Templeton Mutual Fund’s disclosures show it had an exposure of Rs 1,022 crore through five schemes to Ambani’s two promoter companies as of January end.
The mutual fund didn’t respond to queries on the standstill agreement but its spokesperson said over the phone that the exposure is secured by way of pledge over shares of Reliance Capital Ltd., Reliance Infrastructure Ltd., Reliance Home Finance Ltd. and Reliance Power Ltd.
Moreover, the exposure reduced after Feb. 5 when the Ambani group used fixed deposits offered as collateral to make part payment of outstanding debentures, the spokesperson said. But he didn’t disclose the current exposure.
The Ambani group executive quoted earlier, however, said that Franklin Templeton Mutual Fund’s exposure to the group promoters had fallen to Rs 900 crore.
It had a Rs 149.43-crore exposure to Reliance Big Entertainment through three schemes at the end of January, according to its disclosures. The company offered shares of Reliance Capital, Reliance Infrastructure, Reliance Home Finance and Reliance Power as collateral, according to Brickworks Ratings.
Indiabulls Mutual Fund
According to its disclosures, Indiabulls Mutual Fund had the least exposure among asset managers valued at Rs 24.91 crore to the Ambani group at the end of January. It also has a pledge over shares of Reliance Capital, Reliance Infrastructure, Reliance Home Finance and Reliance Power.
Shares of the Ambani group companies surged today after reports that the promoter entities have reached an agreement with lenders. While Reliance Big is the parent of Reliance Infrastructure, Reliance Infrastructure Consulting and Engineers is the promoter of Reliance Capital. Both are wind power generators.
Terms Of Investment
According to Brickworks Ratings, the terms of mutual funds’ investments in group debentures include:
- A bullet repayment at the end of 37 months or on exercise of put option.
- The coupon shall be payable at 12 percent extended internal rate of return at the end of every quarter.
- Overall security cover is two times—0.70 times through Reliance Capital shares; 0.30 times from Reliance Home Finance or Reliance Capital shares; 0.75 times from Reliance Infrastructure shares, and 0.25 times from Reliance Power stock.
- If the security value falls below 1.8 times, that will trigger a share top-up to restore the required collateral level within two business days.
- If the cover falls by more than 50 percent of the initial value, the top-up needs to be in cash or in permissible securities or shares whose price hasn’t fallen by 50 percent.
- The NCD issue also has a corporate guarantee by Reliance Innoventures Ltd., the ultimate holding company of the Anil Ambani group.