Vodafone Idea Ltd on Friday paid Rs 2,850 crore in principal and interest to seven of its bondholders, including Franklin Templeton India, which had shuttered six of its debt schemes and side-pocketed its entire loan exposure to the telecom operator over doubts about the company’s ability to repay.
The payments came as a major relief to Franklin Templeton and the 300,000 investors in the six funds that were wound up on April 23 because of exposure to low-quality debt.
Among mutual funds, Franklin Templeton had the biggest exposure to Vodafone Idea, which continues to grapple with stretched finances. The repayment was part of the Rs 3,500 crore non-convertible debentures sold by Vodafone Idea in 2015 and matured on July 10.
Apart from Franklin Templeton India, which received Rs 1,252 crore, UTI Mutual Fund received Rs 166 crore and Nippon India Mutual Fund received Rs 121 crore. Mutual funds said these part payments will be credited to investors’ accounts in the coming week. A side pocket allows a mutual fund to segregate investments in stressed assets and prevent unit holders from withdrawing their money until the asset manager recovers the funds linked to the stressed assets.
“We have now received the full value of the principal due, along with interest for the period June 12 to July 9, 2020,” a spokesperson for Franklin Templeton said in a statement. “This amount will be distributed to unit holders of the segregated portfolio…. This is the full and final payment for this segregated portfolio and will be made by extinguishing all outstanding units held by each unit holder therein,” he added.
Nippon India said in a statement it has received full payment of dues from Vodafone. The payout will be processed by extinguishing proportionate units in the plans of the segregated portfolio of the respective schemes, it said.
On June 12, Franklin received Rs 102.71 crore in interest payments from Vodafone Idea. UTI Mutual Fund and Nippon India Mutual Fund received ₹13.5 crore and ₹9.3 crore, respectively. Franklin Templeton had a total exposure of Rs 2,400 crore to Vodafone as of December 31; UTI AMC Rs 551 crore, and Nippon Rs 241 crore. Franklin’s remaining exposure is to longer maturity papers.
The repayment comes as a shot in the arm for debt mutual funds, particularly the ones that had taken higher credit risks.