Franklin Templeton Mutual Fund (MF) has said that Essel Infraprojects (EIL) has defaulted on its non-convertible debentures (NCDs). Four of the fund house's debt schemes that are being wound up had made investments in these NCDs.
"The NCDs are backed by a pledge of listed shares of Zee Entertainment Enterprises (ZEEL), Dish TV India Ltd, unlisted shares of EIL, personal guarantee of (Zee founder) Subhash Chandra and corporate guarantee," Franklin Templeton said. "This only reflects the realizable value basis the current share cover and does not indicate any reduction or write-off of the amount repayable by EIL," it said.
This could have an impact on the Zee Group shares, when trading resumes on Tuesday. Most of the Zee group stocks or Essel Group stocks have been suffering from a hangover of pledged shares of the promoter and we may see this once again play out.
In the normal course, when shares are pledged by promoters for debt and they cannot honour obligations, there is a possibility that the holders could sell pledged shares. This can have a cascading impact on the share price.
Many companies tend to pledge the promoter holdings for loans with banks or mutual funds. With the economy likely to be it a deep mess, the promoter pledge could even increase in the coming days.