According to a disclosure made by the AMC, "The liquidity arrangement may involve an aggregate outlay not exceeding Rs 500 crore and will be put in place shortly... Provision of such liquidity arrangement will entail acquisition by the company of non-convertible debentures (NCDs) issued by Essel group companies
held by such FMP schemes at prevailing valuation on respective maturity or purchase dates."
These FMPs faced illiquidity due to their exposure to NCDs issued by Essel group firms — Edisons Infrapower & Multiventures and Sprit Infrapower & Multiventures.
Besides the four FMPs of HDFC Mutual Fund (MF) that matured in April, seven FMPs exposed to the two Essel group firms mature before September. According to the 'standstill' agreement, MFs and other lenders had given Essel group firms time till September to settle their dues. Until then, MFs and other lenders were to put on hold selling promoter shares kept as collateral for these loans.
Overall, HDFC AMC's FMPs maturing before September had nearly Rs 500 crore of exposures to the two Essel group firms. Those FMPs that matured in April had Rs 356 crore of exposure to the Essel group firms. FMPs maturing after September had Rs 377 crore worth of exposures to Essel group entities, an investor note issued in April by the fund house said.
Sources, however, say if the payments related to Essel firms don't come through within the September deadline, the AMC will sell the collateral shares to recover the dues and pay the realisable value to the investors.
In April, some FMPs belonging to Kotak MF and HDFC MF were unable to give full maturity amount to the investors as Essel-related maturities were effectively extended beyond these FMPs' own maturity dates following the 'standstill' agreement.
In May, the Securities and Exchange Board of India (Sebi) had sent show-cause notices to the two fund houses in relation to the FMPs' investments in Essel group companies.
In the following month, the market regulator had initiated adjudication proceedings in the same matter.
MFs, other lenders gave Essel group firms time till September to settle dues
Some Fixed Maturity Plans (FMPs) of HDFC MF, Kotak MF matured before extended-September timeline
These FMP investors were unable to get full amount due to exposures to Essel firms
Sebi sent show-cause notices to the two fund houses