Mutual fund schemes that had isolated their exposure to Vodafone Idea Ltd, breathed a sigh of relief on Friday as they collected both principal and interest payments from the debt-riddled telecom firm. Cumulatively, Vodafone Idea paid out ₹2850 crores to 7 holders of bonds including mutual funds and banks. While Franklin Templeton India’s side pockets received ₹1252 crores, Nippon India Mutual Fund received ₹121 crores and UTI Mutual Fund received ₹166 crores. Within the coming week, said officials of these fund houses, these part payment will be credited to the investors’ accounts.
To ensure that money invested in debt schemes of mutual funds, linked to stressed assets, gets locked until the fund recovers the cash from the company side pocket or a segregated portfolio is established. A spokesperson for Franklin Templeton said in a statement that they have now received the full value of the principal due, along with interest for the period 12 June to 9 July 2020. He also said that this amount will be now distributed to unitholders of the segregated portfolio. Nippon India said that they had an outstanding of ₹121 crores from Vodafone and that they have received 100 percent of it. By extinguishing proportionate units in the plans of the segregated portfolio of respective schemes the payout will be processed.
Franklin received ₹102.71 crores, UTI Mutual Fund got ₹13.5 crores, and Nippon India Mutual Fund got ₹ 9.3 crores earlier on 12th June from Vodafone as interest payments. Franklin Templeton had a cumulative share of approximately ₹2074 crores, UTI AMC is approximately ₹2551 crores, Nippon has ₹241 crores. The remaining money constitutes of longer maturity papers. On 17 February UTI and Nippon India Mutual Fund side pocketed their respective
Vodafone Idea exposures. That was after Care Ratings downgraded it from BBB- to BB- (which is below investment grade). A debt downgrade below investment grade enables mutual funds to side-pocket their exposure.
On 24 January, Franklin had side-pocketed exposure to Vodafone in six debt schemes following CRISIL’s downgrade. These 6 debt schemes are currently in the process of winding up following a fund house decision of 23 April. Vodafone Idea was impacted by the Supreme Court’s adverse rulings, which mounted on the telco an Adjusted Gross Revenue (AGR) liability of approximately ₹50,000 crores. Vodafone Idea’s interest payment is especially important as, on 11 June, the Supreme Court had asked telecom operators to file affidavits on the roadmap and guarantee payment to the telecommunications department (DoT) of AGR-related dues.
