Mutual funds delay, extend maturity of FMPs

New Delhi, Apr 10: Mutual fund investors in fixed maturity plans (FMPs) are facing either extension in maturity of the scheme or getting part repayment. The reason: Exposure of these FMPs to Subhash Chandra-led Zee group companies.
According to industry players, over 50 FMPs have exposure to Zee Group companies. Many of these will be maturing in the next few months. Mutual fund houses, in total, have exposure of around Rs 7,500 crore exposure to Zee companies. According to sources, some fund houses have simply extended the maturity of their schemes while others have informed investors that they will be given part payment now, and the rest in the next six months along with accrued interest. Sources said that the debentures were issued at over 10.5 per cent interest, and the promoters have also promised an additional interest payment once the strategic sale of three of its companies go through. “We have told investors that they are likely to get in excess of 15 per cent on these papers which is substantially more than the amount they would earn on other instruments,” said a fund manager.
In January, the group had reached an agreement with over 40 lenders, including mutual funds and non-banking financial companies (NBFCs). Shares of Zee Entertainment fell sharply in a single day on January 25 when some players sold shares of over Rs 250 crore. That slump sparked panic as the cash-strapped promoters were unable to provide fresh shares to cover the shortfall in collateral. Lenders, including MFs, NBFCs and a few overseas players, agreed in principle to hold off from selling shares of the companies till September 30.