AGR dues: MFs receive interest payment from Vodafone ahead of SC hearing

Franklin Templeton MF, which had exposure to the debt papers of the company in six of its schemes (that are being wound up), also received payment.

Mutual funds (MFs) with exposure to debt papers of the troubled telecom major Vodafone Idea received interest payments from the company on June 12, ahead of a hearing in the Supreme Court (SC) over its dues related to additional gross revenues (AGR) next week.

Franklin Templeton MF (FT MF) — which had exposure to the debt papers of the company in six of its schemes (that are being wound up) — also received the payment. This would allow the fund house to distribute these funds to investors who were invested in the six schemes as on January 24 (effective date of segregation).

"Interest payment was received from Vodafone Idea for 8.25 per cent on June 12, 2020. This amount shall be distributed to the investors in proportion to their holdings in the plans of the segregated portfolio," a spokesperson for FT MF said.

The bonds are slated to mature on July 10, 2020. Before the segregation, the scheme exposures to these bonds stood at Rs 1,124.2 crore (as on December 31, 2019). Other Vodafone Idea bonds held in FT MF schemes are maturing in September, 2023.

UTI MF in a note said that Vodafone Idea made the annual interest payment of Rs 12.38 crore in UTI Credit Risk Fund. The fund house created a segregated portfolio of Vodafone Idea on February 17, 2020, with 65 per cent marked down.

According to people in the know, Nippon India MF had also received the payments. Before creation of a segregated portfolio, the Nippon India’s Hybrid Bond Fund had exposure of Rs 39 crore (as on January 31, 2020) to the debt paper of Vodafone Idea. The fund house has exposure to other papers of Vodafone Idea in its Strategic Debt Fund and Credit Risk Fund. 

Vodafone Idea was downgraded to ‘BB-’ by CARE ratings (below investment grade) on February 17, 2020, following the SC's decision pertaining to the definition of AGR, which led to a liability of around Rs 44,150 crores on Vodafone Idea.

The recovery proceeds will be credited to the investors’ accounts in proportion to their holdings.

According to the SC's order on June 11, the apex court will consider a reasonable time frame along with securities, undertakings, and guarantees which would be required to be furnished by the telecom service providers on the next hearing date, which is June 18.