IDBI AMC, IDBI MF Trustee Company settle BILT case for over Rs 90 lakh

Sebi had initiated inspection after finding BILT subsidiary's default

IDBI Asset Management Company (AMC) and IDBI MF Trustee Company have settled a case related to its schemes’ debt investments in Bilt Graphic Paper Products (BGPPL) by paying Rs 90.47 lakh towards settlement charges.

The matter pertains to alleged violations related to the fund house scheme’s investments in commercial papers of BGPPL -- a subsidiary of Ballarpur Industries (BILT).

In February, 2017, India Ratings downgraded the rating of BILT, which impacted schemes of Taurus Mutual Fund (MF). Following this, Sebi had sought information from fund houses on their exposures to BILT.

IDBI AMC informed Sebi that it didn’t had any investments in the debt securities issued by BILT. However, CPs of BILT’s subsidiary -- held in IDBI AMC’s schemes -- had defaulted on maturity (principal) payments due on January 13, 2017.

After this came to notice, Sebi initiated inspection of IDBI MF in 2018 and ‘prima-facie’ found the AMC had failed to comply with various provisions under the regulatory framework.

These included failure in investment due diligence, failure in fair valuation of securities and failure to ensure fair treatment to all investors. As part of valuation-related violations, the Sebi pointed out that investments in default from “flagship scheme in terms of AUM (i.e. liquid fund) to other schemes, so as to distribute the resulting loss to other not so successful schemes”.

IDBI MF Trustee was also ‘prima-facie’ found not compliant with the regulatory provisions as it “failed to detect lapses in due diligence process followed by the AMC”. Overall, Sebi found that it had failed in its role of keeping an oversight and ensuring that AMC’s activities are in-line with regulations.

Show-cause notices were issued to the AMC and Trustee Company in September, 2019, as to why an inquiry should not be conducted against them. In November, the noticees proposed to Sebi to settle the instant proceedings without admitting or denying “the findings of fact and conclusions of law…”

The high-powered committee of Sebi on April 1, 2020, considered the settlement terms proposed and recommended the case for settlement on payment of Rs 90.47 lakh towards settlement charges.

Last year, Muthoot Finance had announced acquiring IDBI AMC for Rs 215 crore.