Vodafone-Idea problem: Investors in these debt mutual funds may be hit badly

Investors in select debt funds may have to sit up and take notice of recent apocalyptic commentary from the management of Vodafone Idea. In the wake of a Supreme Court order that has left the company facing thousands of crores in additional statutory dues, the Vodafone management described the status of its joint venture with Aditya Birla Group’s Idea Cellular as “critical”. Both entities have indicated that they won’t infuse any further equity into Vodafone Idea unless the government offers relief.

Debt funds holding Vodafone-Idea paper

Failure of the telecom entity to continue as a going concern will potentially hit several debt schemes holding roughly Rs 2,023 crore worth of Vodafone Idea debt. Data from Outlook Asia Capital shows that schemes of four asset management companies— Franklin Templeton MF, Aditya Birla Sun Life MF, UTI MF and Nippon India MF—hold Vodafone Idea debt paper.


Franklin Templeton MF holds Rs 954 crore worth of Vodafone Idea debt, translating into 2.95% of its total assets under management. Aditya Birla Sun Life MF holds Rs 518 crore worth of the firm’s debt securities, forming 2.27% of its asset base. Schemes of UTI MF and Nippon India MF currently have Rs 415 crore and Rs 136 crore invested in the stressed telecom operator. The debt papers of Vodafone Idea continue to be rated ‘investment’ grade, so debt schemes that hold this paper have not yet marked down any of these securities. However, the recent developments should concern investors, particularly in the wake of multiple credit events that have singed debt funds over the past one year.