Regulator Sebi has issued show-cause notices to HDFC and Kotak Mahindra mutual fund houses seeking details about their investments in the debt instruments of Essel Group companies. In the wake of Essel Group companies grappling with debt woes, many mutual funds have come under redemption pressure. In April, HDFC AMC and Kotak Mahindra AMC sought more time for payouts with respect to their Fixed Maturity Plans (FMPs).
Sources said Sebi, which regulates mutual funds, has served show-cause notices to the two asset management companies (AMCs) regarding their dealings in shares of Essel group companies. HDFC AMC Monday said it has received two show-cause notices from Sebi and is in the process of responding to them.
There was no immediate comment from Kotak Mahindra AMC. In a filing to stock exchanges, HDFC Asset Management Company said it has received two show-cause notices from Sebi, dated May 10, in relation to investments in FMPs of HDFC Mutual Fund in debt instruments of Essel Group companies.
"We are working with our legal advisors and are in the process of responding to the said show-cause notices," the filing said. Latest data from the Association of Mutual Funds in India (AMFI) showed that FMPs witnessed a net outflow of Rs 17,644 crore in April while net outflow from debt-oriented schemes stood at Rs 18,949.76 crore.