HSBC Global Asset Management has marked down its exposure from 75% to 100% in its two debt schemes holding the non-convertible debentures (NCDs) of Dewan Housing Finance Corporation (DHFL). The move by the fund house led to a fall in net asset value (NAV) in both the debt schemes by 9-10% on Friday.
The data from Value Research shows that NAV of HSBC Short Duration Fund was down 9.01% on Friday. While the NAV of HSBC Low Duration Fund fell 9.74%. The fund house said both the debt schemes had investments in NCD of DHFL, which matured in August and September last year.
HSBC Global Asset Management, in its note on Friday, said recovery of money in foreseeable future seemed difficult and the economy downturn triggered by the pandemic is only expected to accelerate in the near term. “We have decided to further mark down the matured DHFL NCDs from 75% to 100%. Thus, the matured DHFL NCDs across our impacted funds will be valued at zero with effect from May 08, 2020,” said the fund house.
DHFL is currently under corporate insolvency resolution process as initiated by the Reserve Bank of India under provisions of the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and application to Adjudicating Authority) Rules, 2019.
Pursuant to the admission of the resolution process at NCLT, a Committee of Creditors was formed, and the resolution process is underway. “However, due to the Covid-19 pandemic and resultant national lockdown, the resolution process has been delayed. In addition, the financial markets are facing acute volatility and tight liquidity. Further, there are trading/settlement restrictions applicable on matured NCDs,” said the fund house in the note.
The data from Value Research shows that as on May 8, HSBC Short Duration Fund had given returns of -9.97%, while HSBC Low Duration Fund gave negative returns of 12.93% in the last one year.