Some FMPs of Kotak may not pay full amount on maturity

Investors in some FMPs of Kotak Mutual Fund that mature between April 8 and May end, will not get their full redemption amount back on maturity.

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Investors in some fixed maturity plans ( FMP) of Kotak Mutual Fund that mature between April 8 and May end, will not get their full redemption amount back on maturity. This is because of the delay in recovering money that the schemes have invested in the non-convertible debentures (NCD) of two of Essel group companies, namely Edisons Utility Works Pvt Ltd and Konti Infrapower & Multiventures Pvt Ltd. When the scheme matures, investors will get redemption proceeds minus the holding in Zee group companies. The balance will come to them as and when the fund house recovers the money from the companies, Kotak AMC said.

Kotak Mutual Fund has as many as eight FMPs maturing between April 8 and May. In seven of these schemes they will get more than their principal invested, barring one scheme which will pay 0.6 per cent less than the principal invested .

Kotak Mutual Fund holds paper worth Rs 360 crore in two companies of Essel group namely Edisons Utility Works Pvt Ltd and Konti Infrapower & Multiventures Pvt Ltd.


The fund house has a cover of 1.4 times against these borrowings. The NCDs are backed by equity shares of Zee Entertainment , but on January 26, most of the lenders and mutual funds who had lent money to the Essel group had agreed to not sell the shares to recover the money if there is any default. Lenders have granted time till around September 2019 by which time they expect the company to make a stake sale and pay all its dues. As and when this money comes back from the Essel Group, Kotak Mutual Fund will repay its unitholders. Kotak Mutual Fund will not have to create a side pocket since this is a fixed maturity plan ( FMP) and no fresh money will flow into this scheme.

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