Nippon India Mutual Fund, formerly known as Reliance Mutual Fund, has come under the scanner of the Central Bureau of Investigation (CBI) for investing Rs 950 crore in non-convertible debentures (NCDs) of Morgan Credit Private Limited, a company owned by the Rana Kapoor family.
The CBI probe is part of a larger multi-agency investigation, which includes the Securities and Exchange Board of India (SEBI) as well. The agencies are examining cumulative investments worth around Rs 2,850 crore made by firms formerly owned by Reliance Capital in AT1 bonds issued by Yes Bank.
In the latest development, the central investigation agency has sought a set of documents and information related to the investments made by the fund house in April 2018.
The CBI asked Nippon Mutual Fund for these documents on December 21.
An email query sent to Nippon India MF remained unanswered till the time of publishing this story. The story will be updated if the fund house responds
Sebi Show Cause Notice
Meanwhile, the capital markets watchdog issued a show-cause notice in August this year to the asset management company along with other entities including Anil Ambani, his son Jai Anmol Ambani, Rana Kapoor and top executives of Nippon India MF including CEO Sundeep Sikka; Amit Tripathi, CIO – Fixed Income and Milind Nesarikar, Chief Officer – Operations & Customer Service.
The transactions happened at a time when Reliance Capital was the parent entity of the asset management company and some of the other companies involved in the probe – Reliance Home Finance, Reliance Commercial Finance.
The name of the fund house was changed from Reliance Mutual Fund to Nippon India Mutual Fund in September 2019.
The matter goes back to the period between December 2016 and March 2020 when certain transactions between Yes Bank and companies then owned by Reliance Capital attracted the regulator’s attention. The probe is intended to unearth if there were any “quid pro quo” arrangements.
Basis the probe, the show-cause notice issued by SEBI alleged that the then Reliance Mutual Fund and Reliance Capital invested a cumulative amount of Rs 2,850 crore in AT1 bonds issued by Yes Bank. A part of these investments was made in NCDs issued by Morgan Credit Private Limited.
Quid Pro Quo Alleged
According to SEBI, there was a quid pro quo arrangement as Yes Bank provided a facility of Rs 500 crore in January 2017 to Reliance Home Finance – partly by way of cash credit / working capital demand loan and rest by way of investment in NCDs issued by Reliance Home Finance.
Later, in October 2017, Yes Bank provided another facility of Rs 2,900 crore in the form of investments in NCDs issued by Reliance Capital, Reliance Home Finance and Reliance Commercial Finance.
.Meanwhile, in a stock exchange statement issued on September 7, Nippon Life India Asset Management confirmed that it has received a show-cause notice from SEBI.
“The SCN has been issued, inter alia, to the Company and certain individuals who during 2016-2020 held positions as the CEO & ED, the CIO / Head-Fixed Income, and the CRO, in connection with certain investment made in AT-1 Bonds of Yes Bank Limited by then Reliance Mutual Fund,” stated the stock exchange statement.
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