SEBI Issues Show-cause Notice to HDFC and Kotak Mutual Funds
Moneylife Digital Team 14 May 2019
The two mutual fund (MF) houses, viz., HDFC Asset Management Company Ltd. and Kotak Mahindra Mutual Fund have received show-cause notices (SCN) from the securities market regulator, Securities and Exchange Board of India (SEBI), in connection with the default of payment on maturity of fixed monthly plans (FMP).
 
HDFC confirmed having received two show-cause notices as on 10th May with regard to its debt investments in Essel group. The provision to recover the dues through the sale of pledged shares was not adopted by these fund houses. 
 
According to SEBI, investors are suffering losses due to the inability of these fund houses to sell the pledged shares of Essel group, which stands as an important reason for issuance of SCN’s. 
 
With the Essel group being debt-ridden, two of its companies, viz., Konti Infrapower and Multiventures and Edisons Utility Works, failed to repay the investment in FMPs. Last month, the investors of two fund houses were in for an unpleasant surprise after their money being invested in the the troubled Essel group, showed no signs of returns close to the maturity.
 
While Kotak Mutual Fund paid the principal amount and offered to pay interest component on realizing the dues, HDFC has proposed an extension of the maturity by one year.
 
HDFC Mutual Fund, on Monday communicated that “We are working with our legal advisors and are in the process of responding to the said SCNs.”  Kotak Mutual Fund did not comment on the SCN.
 
Comments
DeepakSB
3 years ago
As per the view from our respective unit, AXIS Hybrid Fund - Series 32 may have credit risk as the exposure to Dewan Housing Finance Corporation Ltd is 8.35%.
Out of your funds ,
----------------------------------------------------------------------------------
Axis long term equity fund & Aditya birla Sl tax relief fund are
recommended by us which you can see in the above reckoner.

For Rest of the funds I cannot share the view on mail.

If you have any query Kindly contact me on the below number .


Regards,

Digital Relationship Manager
DeepakSB
3 years ago
Mutualfund brokers still recommends investment in MFs which are likely to default of FMP.Can any expert comment on this for a common / retail investor?
DeepakSB
3 years ago
Mutualfund brokers still recommends investment in MFs which are likely to default of FMP.Can any expert comment on this for a common / retail investor?
Jasmin Rupani
Replied to DeepakSB comment 3 years ago
Are you serious? FMPs are closed-ended funds, which means that once the NFO (new fund offer) closes, the scheme cannot accept any further investment. How can Mutual fund brokers recommend those funds which are 'likely to Default'???
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