Debt mutual funds collectively hold around Rs 1,250 crore in the debt papers of Infrastructure Leasing & Financial Services (IL&FS) and its subsidiary IL&FS Financial Services. Ratings agency Icra had on Sunday downgraded commercial papers, non-convertible debentures and long-term instruments of both the companies.
Icra has revised the short-term rating for the Rs 4,000-crore commercial paper programme of IL&FS Financial Services to A4 from A1+. The rating of A4 is placed under rating watch with developing implications. The rating agency also revised the long-term rating for the Rs 5,225 crore non-convertible debenture and the Rs 350 crore long term-term loans of IL&FS to BB from AA+. ICRA has revised the short-term rating for the Rs 2,500 crore commercial paper programme of IL&FS to A4 from A1+. The ratings remain under rating watch with developing implications.
There are around 32 schemes which have invested in debt papers of both the companies. Of 32 schemes, 12 have invested in IL&FS, while other 20 schemes have invested in debt papers of IL&FS Financial Services. Schemes such as Motilal Oswal Ultra Short Term Fund, Principal Short Term Debt Fund, Tata Short Term Debt Fund, HSBC Cash Fund, LIC MF Liquid Fund among others as on July 31, 2018 showed data from Value Research.
Aashish P Somaiyaa, CEO at Motilal Oswal AMC, said: “The month-end fact-sheet data has changed as we had a maturity and we have received the proceeds. We don’t have any credit/long bond funds and hence there are no long duration exposures to any subsidiaries of ILFS or to any projects etc. The only exposure is CP of ILFS which is the holding company.”
He also added that the rating downgrade definitely results in higher asking yield for papers to be valued and hence there would be mark-to-market (MTM) impact on portfolios. Considering ILFS is repaying obligations on time and raising capital in the next few days, reacting to any MTM is futile.
The data from Value Research shows that Motilal Oswal Ultra Short Term Fund as on July 31, 2018 has an exposure of Rs 97.54 crore. According to Somaiyaa, Rs 25 crore have been paid by IL&FS for the paper which matured today. Tata Mutual Fund on Monday sent a note to their corporate investors on their position on the IL&FS downgrade. According to the Value Research data, Tata Short Term Debt fund has an exposure of around Rs 165 crore in debt papers of IL&FS as on July 31, 2018.
“We are closely monitoring the liquidity position of the IL&FS group. The group is expected to raise Rs. 8,000 crore by November 2018 through a combination of equity investment and debt funds from its shareholders. In the interim, the group is in discussions to manage liquidity through debt funding to tide over repayments for the near term…,” Tata MF said in a note .
Shares of IL&FS group companies tumbled up to 14% on Monday. IL&FS Transportation Networks slumped 13.79%, IL&FS Investment Managers dived 10.99& and IL&FS Engineering and Construction Company plunged 6.55% on the BSE. The three stocks hit their respective 52-week lows in intra-day trade.