An Indian five hundred rupee banknote (Photographer: Dhiraj Singh/Bloomberg)

SEBI Issues Show Cause Notice To HDFC AMC

HDFC Asset Management Company Ltd. has received two show cause notices from the Securities Exchange Board of India for delaying repayment to fixed maturity plan investors.

The notices have been issued in relation to investments of fixed maturity plans of HDFC Mutual Fund in debt instruments of the Essel Group, the company said in a stock exchange filing. “We are working with our legal advisors and are in the process of responding to the show cause notices.”

The asset manager, however, hasn’t specified the contents of the notices.

Last month, HDFC Mutual Fund decided to roll over their fixed maturity plans for one more year, a decision taken after a meeting with Zee Entertainment Enterprises Ltd.’s promoters and a group of lenders. The asset manager said that the promoters conveyed their inability to provide additional equity shares and hence they were granted additional time to complete their plan of selling Zee shares.

HDFC Mutual Fund had said granting additional time to Essel Group offered greater chance of a higher or complete recovery against the debt exposures.

HDFC Mutual Fund has 25 fixed maturity schemes with exposure of about Rs 1,156 crore to Essel Group firms, according to a statement issued last month.

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HDFC Mutual Fund wasn’t the only one affected by the Essel Group exposure. Kotak Mahindra Asset Management Company marked down the net asset value of its two fixed maturity plans saying investors may not be able to fully redeem investments because of exposure to the debt-laden group.

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