With the promoters of Essel group companies having sold a part of their stake in Zee Entertainment Enterprises, HDFC Mutual Fund has informed investors that it has received part of the proceeds from Essel in the form of partial repayment in lieu of the Essel exposure held by the fund house’s schemes. With this partial repayment, the aggregate market value of the outstanding exposure of HDFC MF to Essel group as on September 11, 2019, stands reduced to Rs 383.6 crore. This is more than 47% lower than the Rs 728 crore exposure as on August 31, 2019.
Essel/Zee Group is understood to have repaid up to 60% of its outstanding debt to different mutual fund houses. The repayment by the Essel group is not totally unanticipated. The MF industry had a total exposure of over Rs 6,000 crore to the Essel Group. Last month, the group had raised Rs 4,200 crore by selling an 11% stake in Zee Entertainment to Oppenheimer. It is understood that Essel has repaid about Rs 3,000 crore to mutual funds now.
As per HDFC MF data, HDFC Credit Risk’s aggregate market value of the outstanding exposure to Essel is now Rs 144 crore compared to Rs 271.5 crore earlier. This is the single largest exposure to Essel from any HDFC debt fund. The other open-ended debt scheme from HDFC MF to have exposure to Essel is HDFC Hybrid Debt Fund, though marginal at Rs 0.6 crore compared to Rs 1.2 crore earlier.
A bulk of HDFC MF’s Essel exposure is through closed-ended schemes. For instance, HDFC FMP 1168D February 2016 (1), slated to mature on 29-Apr-2020, has Rs 47.6 Essel exposure compared to Rs 70.1 crore earlier. Similarly, HDFC FMP 1309D September 2016 (1), slated for 20-Apr-2020 maturity, now has Rs 43.5 crore Essel exposure compared to Rs 93.6 crore earlier.
Below is the HDFC MF scheme-wise market value of the exposures to Essel group companies. The data is as on September 11, 2019.
“We continue to monitor the developments closely and are engaging with the promoters of Essel group companies for repayment of the remaining exposure of the schemes,” HDFC MF says.
Essel’s promoters have time till September 29 to repay the outstanding debt. They had inked an agreement with mutual funds, as per which the funds would not sell the shares that they held as collateral in the open market. If the full amount is not repaid, all eyes would be on how Essel group and funds come to an agreement on the rest of the repayment schedule. Regulator SEBI has not taken kindly to the ‘standstill agreement’ between Essel and fund-houses.
While Essel paying some dues to mutual funds was known, granular information provided by HDFC Mutual Fund gives a good idea to investors about the nature of the balance exposure. Investors would hope the rest of the money is paid along with applicable interest within September 29, 2019 so that fund houses can redeem their standing in the market. Any further extension would only hit the already weak market sentiment related to debt funds.
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