InvestorQ : What is the problem that Indian mutual funds are facing with the Amravati Bonds and how big is the problem?
Jignesh Gupta made post

What is the problem that Indian mutual funds are facing with the Amravati Bonds and how big is the problem?

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Ria Roy answered.
3 years ago
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The Amravati bonds were issued by the former Andhra government to develop Amravati as the new capital of the state of Andhra Pradesh. The World Bank had also been funding the project. Two mutual funds, Aditya Birla MF and Templeton MF have an exposure of Rs.1300 crore to these Amravati Bonds. Apparently, these bonds have run into trouble for two reasons. Firstly, the new chief minister of Andhra Pradesh, Jagan Reddy, is reversing a lot of initiatives taken by the previous chief minister, Chandrababu Naidu and he also has second thoughts on the plan to develop the city. Secondly, the World Bank has withdrawn its $300 million funding for the project due to the political uncertainty in the state.

Now that puts these two mutual funds in a spot of bother. Out of the Rs.5000 crore issues, nearly 25% was taken by these two mutual funds. These are 10 year bonds with a 5 year payment moratorium and hence these funds will be locked in for another 4 years as the bonds issued only in 2018. For the two mutual funds, this comes as the latest problem in the midst of a series of problems that Indian mutual funds are already facing on the debt funds front.

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