What happened in Kotak Mutual Fund FMP Plan - MYREALITY.In, Real Estate, Share Market, Mutual Fund, Insurance
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Thursday, April 11, 2019

What happened in Kotak Mutual Fund FMP Plan

What happened in Kotak Mutual Fund FMP Plan

Q1: What happened? 

Kotak MF had FMP maturity on 8th Apr - Kotak Series 127. It informed investors since it had an exposure to Zee/Essel Group Debt (backed by Zee Shares), for which they have not got the monies back. So they will pay that amt, if and as they get it back

Q2: Is it limited to only one FMP from Kotak MF?
Overall the mutual fund industry has an exposure of around 8000-9000 crs to Zee/Essel Group in deb across mutual funds and schemes.

Of this around 1700 cr is in FMPs and the rest in open ended debt funds

Q3: Why only FMPs are holding back maturity payment? Will open ended funds also hold back part of redemption amount?

FMPs have a maturity date and hence if it cannot liquidate their portfolio on the maturity date, they don't have money to pay. So it is limited to FMPs

Q4. How many FMPs are impacted?

Totally around 55 FMPs have an exposure to Zee/Group Debt. The maturities have just started. In the next 2-3 months, almost 30-40 of these FMPs will mature. So all the investors in such FMPs may be impacted

Q5: So is it just a delay of payment by 6 months or as an investor I may not get that money back?

Mutual Funds will pay back - if and as much - when they get monies back. As of now it is a delay but it is contingent of if the promoter pays back on resolution of problems

Q6: Which are the FMPs of Kotak that are impacted?

On a first glance, there are six Kotak FMPs which have this exposure. One matured on 8th April. The other is maturing today. 

There are other mutual funds also which have this exposure in FMPs which list will be shared

Q7: Is the mutual fund correct in holding back the monies?

Ideally (and Theoretically), the MF should have invoked pledge of Zee Shares and returned investor's monies

But they have an unwritten understanding with Promoter that they will not do this and give 6 months time

Q8: Hey that's not fair! They can't get into unwritten pact with Promoters!

They can. The problem is when a small quantum (200 crs) of Zee shares was sold in January, caused the Zee price to halve

Here the quantum involved in much more. If they sell, everyone loses

Q9: So what should an FMP investor do?

You have to wait and hope the problem resolves. The probability of the problem resolving is high and you may get your total monies back. And also interest for this period.

**** End****
What happened in Kotak Mutual Fund FMP Plan Reviewed by S Chitra on April 11, 2019 Rating: 5 What happened in Kotak Mutual Fund FMP Plan Q1: What happened?  Kotak MF had FMP maturity on 8th Apr - Kotak Series 127. It infor...

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