Already under stress for its investments of around Rs 200 crore in the troubled auto ancillary company, Amtek Auto, problems of JP Morgan AMC only seem to be mounting following the restriction on redemption in two schemes — Short Term Income Fund and India Treasury Fund.
While five entities — ITC Ltd, promoters of HCL Technologies and HeroMotocorp, another IT major in Bengaluru and tech start-up OYO Rooms — that have aggregate investments of over Rs 400 crore in the two schemes of JP Morgan, have been left in the lurch, some of them are learnt to be exploring legal actions against the fund house for not allowing them to redeem their investments even as three others were allowed to do so before them.
- Insolvency and Bankruptcy Code: NCLT okays Liberty House plan to acquire Amtek Auto
- After selling Amtek bonds, JP Morgan AMC allows redemption in 2 schemes
- JP Morgan bought Amtek Auto’s ‘risky’ bonds from Axis Bank
- All leading MFs exposed to debt with low ratings
- JP Morgan AMC’s redemption crisis: ‘Don’t liquidate holdings in a hurry’
- JP Morgan’s 1% cap on redemption sparks off debate on liquidity commitments of MFs
A market expert close to the development said that three corporate houses — a large Mumbai-based one, an IT major and a pharma major based out of Bengaluru — made a hurried exit on Wednesday (August 26) and liquidated their holdings from JP Morgan Short Term Income Fund and India Treasury Fund. However, only two days later, when five other large investors approached the fund house to redeem their holdings, the firm declined to accommodate their request and imposed restriction on redemptions at 1 per cent of the total number of units outstanding on any day.
“A couple of these companies are now exploring legal options against the fund house for not allowing them to exit even as others were allowed to do so. While three players made an exit just at the nick of time, other players including ITC, promoters of HCL Technologies and Hero Group, who approached the fund house to redeem their investments on Friday (August 28) were not allowed to do so,” said an industry insider who did not want to be identified.
Another investment expert said that OYO Rooms, which provides access to a network of hotels across the country through its app, had invested close to Rs 100 crore within a week of the fund house putting a cap on redemption and while it tried to redeem on Friday, it was also denied from liquidating its investment. “The firm is not only looking to drag JP Morgan AMC to court for not allowing them to withdraw their investment but also the distributor that advised them to go ahead with the investment,” said the source.
While ITC declined to comment, email sent to HCL Technologies did not evoke any response. Email sent to OYO Rooms and calls and messages sent to its founder Ritesh Agarwal went unanswered. When The Indian Express called Ashwani Sharma, spokesperson of Hero Group, he said, “I am unaware of this and I am hearing it for the first time.” In response to an email sent to JP Morgan AMC and JP Morgan India, the latter said, “We decline to comment.” It is important to note that while Amtek Auto has been under financial stress for few quarters now, JP Morgan AMC was the only one to have subscribed to the bonds issued by the firm and invested around Rs 200 crore.