Sebi sends show-cause notice to HDFC AMC over investments in Essel firms

The Securities and Exchange Board of India (Sebi) has sent two show-cause notices to HDFC Asset Management Company (AMC) in relation to its investments of fixed maturity plans (FMPs) in debt instruments of Essel Group firms. In an exchange filing, HDFC AMC said the notices by Sebi were sent on May 10, adding, “We are working with our legal advisors and are in the process of responding to the said show-cause notices.” However, details of show-cause notice are yet to be known. HDFC Mutual Fund had rolled over one of its FMPs, which has investments in two Essel Group companies. According to the portfolio disclosure as of March 2019, HDFC Fixed Maturity Plan – 1168 Days – February 2016 (1), which was extended by over a year, has invested around Rs 66.490000000 in Edisons Infrapower and Multiventures and Sprit Infrapower and Multiventures group companies of Essel. Before that, Kotak Mutual Fund had conveyed to its investors that the fund may not be able to pay entire redemption amount for the Kotak FMP Series 127, which matured on April 8. Industry players estimate debt mutual funds have an exposure of around Rs 6,000-7,0000000000 to debt instruments of Essel Group firms. —FE