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Aditya Birla Sun Life MF Segregates Exposure To Essel Group Firm After Default On Debt

Aditya Birla Mutual Fund has segregated its exposure to an Essel Group company after the firm defaulted on a debt payment.

A motorcyclist passes passengers sitting next to an advertisement for the Mutual Funds Sahi Hai campaign by the Association of Mutual Funds in India. (Photographer: Dhiraj Singh/Bloomberg)
A motorcyclist passes passengers sitting next to an advertisement for the Mutual Funds Sahi Hai campaign by the Association of Mutual Funds in India. (Photographer: Dhiraj Singh/Bloomberg)

Aditya Birla Mutual Fund has segregated its exposure to an Essel Group company after the firm defaulted on a debt payment.

That came after Adilink Infra & Multitrading Pvt. Ltd., an infrastructure company of the Subhash Chandra-led business house, failed to repay a minority investor on Nov. 25, leading to a default.

The minority investor—whose identity isn’t immediately known—had exercised the put option available to them.

The fund house, however, said it has treated this as a credit event and has proposed to create segregated portfolios for its exposure to Adilink Infra. The segregation has been done at the price at which the security was valued as on Nov. 22. The schemes had valued their exposure at 65 percent of the total investment.

That comes within a week after domestic mutual funds recovered their entire money lent against shares of Zee Entertainment Enterprises Ltd. to the Essel Group after the second tranche of share sale by the group’s promoters fetched them Rs 4,343 crore on Nov. 21.

BloombergQuint has reviewed the communication the mutual fund house sent to its investors in which it has confirmed the segregation of its exposure.

Queries emailed to Essel Group remained unanswered. This story will be updated once it responds.

The non-convertible debentures of Adhilink Infra are unrated and matures in March 2020. Aditya Birla Mutual Fund was the majority debenture holder with three of its schemes holding 98.65 percent of the outstanding debentures. The minority investor held the remaining 1.35 percent share, the fund house informed its investors.

The fund house also said it expects repayment for the non-convertible debentures to be done by monetising the company’s road assets which are pledged to the mutual fund as security. Given that these are unlisted infrastructure assets, the sale process is long drawn, the fund house said.

“Base case valuations done through reputed third-party vendors indicate that when the monetisation process is successfully completed for the portfolio, the entire exposure can be taken out,” the fund house said, adding it’s exploring all options.

The fund house will list the side -pocketed portfolio, which can be traded on the exchanges within 10 working days. The side pocketed portfolio will not allow redemptions and subscriptions.

Essel Group is required to pay lenders proceeds from sale of its infrastructure assets, including roads and solar farms by March 2020, many of these assets are securitised against receivables from these assets and pledge against shares of Dish TV India Ltd.

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