Mumbai: Aditya Birla Sun Life Mutual Fund risks losing a part of ₹792 crore that it invested in Essel companies, as the Subhash Chandra-led group has failed to sell four road projects that secured the borrowings despite trying for nearly a year.
The fund, one of India’s largest asset managers, has already “side-pocketed" its assets under management in three schemes, Aditya Birla Sun Life told investors on Monday. A side pocket lets a fund separate bad assets from other liquid investments in a debt portfolio, which could get impacted by the credit profile of underlying instruments. The funds in question are ABSL Medium Term Fund, ABSL Credit Risk Fund and ABSL Dynamic Bond Fund.
In January, Essel Infraprojects had put up six road assets for sale, including the four cited above. There has been no buyer for the assets despite the presence of road sector investors such as Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ) and a joint venture between National Investment and Infrastructure Fund and Road is in India.
The four road assets are Lucknow-Rae Bareli national highway in Uttar Pradesh, Lebad-Jaora state highway in Madhya Pradesh, Kundli-Manesar state highway in Haryana and Mukarba Chowk-Panipat national highway in Haryana.
Neither Aditya Birla nor the Essel group confirmed the names of the underlying road assets. While the first three roads are operational, the fourth isn’t.
The Tribune reported on 15 June that only 42% of the work has been done on the ₹2,128.72-crore Mukarba Chowk-Panipat project, which was to be completed by April 2019. Aditya Birla had bought non-convertible debentures (NCDs) worth ₹792.67 crore sold by Adilink Infra and Multitrading Pvt. Ltd in 2017. These NCDs are secured against four road assets of Essel Infraprojects.
“The repayment of the Adilink NCDs is expected to be done through the monetization of the road assets which are pledged to us as security," the fund house told investors in a statement. “There are a few potential investors who are actively evaluating these road assets in parallel. We are looking to realize the best value for the entire portfolio of road assets (which include toll and annuity assets) and currently, the process is at different stages with different investors," the statement added.
A. Balasubramanian, chief executive of Aditya Birla Sun Life Mutual Fund, said: “The money on Zee’s loan against shares is back today and we will gain across all existing exposure in the main schemes. The outstanding is only Adilink. Once the sale of road assets gets finalized, we get our money back." (The money that Balasubramanian says has come back refers to other loans from the fund to Essel group).
A spokesperson for the Essel group said: “The said loan is against security of various road assets owned by Essel Group for which dialogues with interested buyers are at advanced stages. The group cannot disclose the names of the potential buyers at this stage due to confidentiality agreements."
The payment crisis within the Essel group came to the fore in January when the group was faced with a debt of ₹16,237 crore in various group companies and another ₹13,000 crore borrowed by promoters.
In order to repay this, the group sold 26.7% stake in Zee Entertainment Enterprises Ltd (ZEEL), its flagship media firm, to a clutch of institutional firms, reducing Subhash Chandra-run promoter shares to just about 5%.
On Monday, Subhash Chandra stepped down as chairman of ZEEL, the company he had founded in 1992. While several of Essel creditors, especially those who held pledged shares of Zee and Dish TV have got their money back, Aditya Birla Sun Life which holds the road assets as collateral is yet to recover some of its dues.