HDFC Mutual Fund Explains Why It Rolled Over Its Fixed Maturity Plans For A Year

HDFC Mutual Fund said the decision to roll-over their fixed maturity plans for one more year was taken after a meeting with Zee Entertainment Enterprises Ltd. promoters and a group of lenders where it was decided to grant them additional time.

“The promoters conveyed their inability to provide additional equity shares as most of their domestic shareholding was already pledged,” the asset manager said in a statement today. “Consequently, a meeting was held between the promoters and group of lenders and it was agreed to provide additional time to promoters to complete their ongoing strategic sale plan of ZEEL shares.”

HDFC Mutual Fund said in this “unprecedented situation”, when shares of Zee and Dish TV fell sharply, the company had two choices: to invoke the pledged shares and sell immediately, or two extend the maturities of fixed plans that had exposure to Essel Group.

The first plan, it said, would have resulted in significant under recovery. But the second plan offered more chance of a higher or complete recovery against the debt exposures, it added. “Thus, the risk reward seemed clearly in favour of providing additional time to Essel Group. In the given circumstances, this was the best course of action available with lenders.”

The asset manager said Zee's “strong intrinsic value” and assurance from promoters of a successful strategic asset sale helped them to reach the decision.

The full list of HDFC Mutual Fund's fixed maturity plans with exposure to the Essel Group can be downloaded here.