MUMBAI: IL&FS met this years bond interest payment commitments to Indias biggest pension fund, which had purchased triple A-rated papers of the now troubled infrastructure financier as part of the mandate to broaden its investment universe beyond sovereign debt.

The Employees' Provident Fund Organisation (EPFO) received payments from IL&FS a few months earlier on around Rs 600 crore of investments, meaning the next installment of payment is due in five to eight months, said two market sources familiar with the matter.

IL&FS sold two series of bonds in 2010 and 2011.

“EPFO made a special dispensation to invest in those triple-A rated corporate bonds as the pension fund was not allowed to invest in private company bonds then,” said one of the persons cited above.

Since public holdings, including those of LIC of India, were about 40% in IL&FS, the pension fund subscribed to the bonds.

In May 2010, IL&FS raised Rs 350 crore by selling bonds directly to the EPFO with those securities offering 8.96%, with 15-year maturity. Next year, on February 22, it sold Rs 225 crore worth of bonds to the pension fund, offering 9.70% with a 10-year maturity, sources said.

An email query sent to the EPFO remained unanswered until the publication of this report.

Before those, the company issued bonds in three-four tranches selling bonds to EPFO. But those investments were small.

Other standalone provident funds too have invested in IL&FS bonds. They too are in talks to chart out the future action plan but will wait for the outcome from the proposed board meeting on Saturday.

This year, IL&FS have already defaulted interest payments/corporate deposits to various mutual funds and institutions. This has led investors to dump securities issued by non-banking finance companies (NBFC).

LIC Mutual Fund, Motilal MF, and Principal MF are some of the fund houses that have not been paid interest dues.

The infrastructure conglomerate did not repay the Small Industries Development Bank of India (SIDBI) for its corporate deposits.

Original Article


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