There was some relief for MFs that had side-pocketed their exposure to the bonds of Vodafone Idea. The company has cumulatively paid out a sum of Rs.2850 crore to 7 bond holders including mutual funds and banks, which covers interest and principal component. This is out of the Rs.4000 crore worth exposure to Vodafone that was side pocketed by MFs.

Franklin Templeton received Rs.1252 crore, UTI received Rs.166 crore while Nippon India MF received Rs.121 crore. The said amount will be distributed to unit holders against that portion of their MF portfolio that was side pocketed. Along with the payouts to investors, the proportionate number of side pocketed units will also be extinguished.

The 3 funds quoted above have a total exposure of Rs.2800 crore to Vodafone Idea and only part has been repaid but it is positive that the process has started. The remaining exposure is to longer maturity paper of Vodafone Idea. The side pocketing by these funds had been necessitated after CARE had downgraded these bonds to below investment grade.

It may be recollected that Rs.4000 crore worth of units had been side-pocketed by mutual funds out of which Rs.3000 crore was by Franklin Templeton alone. Most AMCS had opted to create a total of more than 30 side pockets towards their bond exposures to Yes Bank, Vodafone-Idea, Adilink Infra, Altico Capital India, and Dewan Housing Finance.