Franklin Templeton MF has the highest 62% exposure in Vodafone Idea, MFs held Rs 3,000 crore worth debt papers in the company
Mutual funds (MFs) are in the spotlight after it emerged that they have a total debt exposure worth Rs 3,000 crore in Vodafone Idea.
Franklin Templeton MF, which has 62 percent (Rs 1,738 crore) exposure in Vodafone Idea (VIL) - the highest, is the first fund house to mark down its investment in the company to zero.
"The large quantum of AGR dues and the immediate payment timeline is resulting in significant uncertainty with respect to our exposure to VIL. As per news reports, VIL acknowledged its inability to retain financial solvency in the absence of relief measures from the government," a statement uploaded to the MF's website read.
"Debt securities of VIL held in schemes of Franklin Templeton have been marked down to zero. The valuation adjustment only reflects the realisable price of the relevant securities on the date of valuation and does not indicate any reduction or write-off of the amount repayable by VIL," the statement added.
The fund house also notified that fresh inflows in the scheme have been limited to Rs 2 lakh per day, per fund, per investor, until further notice.
Six schemes of Franklin Templeton MF namely - Franklin India Ultra Short Bond Fund, Franklin India Short Term Income Plan, Franklin India Low Duration Fund, Franklin India Credit Risk Fund, Franklin India Dynamic Accrual Fund and Franklin India Income Opportunities Fund have exposures of 4 percent to 6.5 percent in Vodafone Ideal debt papers.
The marking down of exposure in Vodafone Idea has led to a 4-7 percent drop in the net asset value of its schemes.
Franklin Templeton is followed by UTI MF, Nippon India MF and Aditya Birla Sun Life MF in terms of exposure to the company, Morningstar India data showed. The other three have not yet marked down their holdings.
According to brokerage houses, the only option left with Bharti Airtel and Vodafone Idea is to file a curative petition with a wider bench, but the time is short.
"It is likely that the government breaks its silence and spreads out the payment over a long period. No action by the government will include a major hit to government revenues. The chances of a relief from a curative petition before January 23 deadline look remote. Spread-out payments plus tariff increases are a feasible combination," IIFL Securities said.
The Supreme Court's on January 16 dismissed petitions filed by Bharti Airtel, Vodafone Idea, Tata Teleservices and RailTel, seeking a review of its judgment on adjusted gross revenue (AGR).
This came as a major setback especially for Vodafone Idea and Bharti Airtel, which owe the government around Rs 44,000 crore and Rs 35,586 crore, respectively, payable by January 23.
RailTel is the only state-owned telecom infrastructure services provider.
In its October 24 order on the longstanding AGR-liability case, the apex court ruled in favour of the Department of Telecommunications (DoT) and ordered telcos to pay their AGR liabilities within three months of the judgment date, which is January 23.
Bharti Airtel and Vodafone Idea, in total, reported a loss of nearly Rs 74,000 crore in quarter that ended September 2019 on account of provision for AGR dues.
As per the latest telecom subscribers data for November, Vodafone India lost 3.64 crore subscribers in a month against the addition of 1.89 lakh users in the previous month. It still has 33.62 crore subscribers, making it the number two company in India.
Reliance Jio is the number one player in terms of subscribers (36.99 crore).
Disclaimer: Reliance Industries (RIL), which also owns Jio, is the sole beneficiary of Independent Media Trust which controls Network18 Media & InvestmentsNot sure which mutual funds to buy? Download moneycontrol transact app to get personalised investment recommendations.