Debt schemes: Mutual Funds exposure to DHFL group firms at Rs 6,500 crore

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New Delhi | Published: April 23, 2019 2:16:03 AM

UTI Mutual Fund has investments of around Rs 1,540 crore in various group companies of DHFL across 36 debt schemes, while Reliance Mutual fund has an exposure of Rs 1,436 crore, data available till March 31, 2019, from Value Research showed.

mf, mutual fundLast week, ratings agency Crisil had downgraded commercial papers worth Rs 850 crore issued by DHFL.

Exposure of mutual funds to the securities of the Dewan Housing Finance Corporation (DHFL) group stood at around Rs 6,500 crore as on March 31, 2019. Out of these funds, 210 debt schemes have invested around Rs 5,450 crore in the debt papers of DHFL, and the remaining in Wadhawan Global Capital, Avanse Financial Services and Aadhar Housing Finance.

UTI Mutual Fund has investments of around Rs 1,540 crore in various group companies of DHFL across 36 debt schemes, while Reliance Mutual fund has an exposure of Rs 1,436 crore, data available till March 31, 2019, from Value Research showed. Further, Axis Mutual Fund has invested around Rs 400 crore in DHFL through various debt schemes, while DHFL Pramerica Mutual Fund has an exposure of around Rs 289 crore.

Last week, ratings agency Crisil had downgraded commercial papers worth Rs 850 crore issued by DHFL. Crisil had downgraded its rating on the commercial paper of DHFL to ‘A3+’ from ‘A2+’. The rating continues to be on ‘Rating Watch with Negative Implications’.

“The downgrade is driven by continued low visibility in raising funds and Crisil’s belief that liquidity levels will remain subdued vis-a-vis earlier expectations. Expected fund flow from sell-down of project finance loans, high-value securitisation transaction (comprising greater proportion of non-housing loans), and proceeds from stake sale of associate entities are taking longer than expected. While DHFL has the ability to raise funds through securitisation of housing loans, these are expected to be more intermittent and intrinsically linked to liquidity levels, cash outflows and induction of strategic investor,” Crisil said.

Fund houses such as Aditya Birla Sun Life Mutual Fund, L&T Mutual Fund, Kotak Mutual Fund and Franklin Templeton Mutual Fund, among others, have exposure to DHFL or its group companies. “Most of the fund houses have secured bonds and right now we don’t feel that it will have any major impact due to the rating downgrade of a commercial paper. They are servicing their debt very well and there has been no defaults in any of the payments, we hope this issue will be solved soon,” said the head of fixed income from a leading fund house.

“Liquidity level was at around Rs 4,000 crore during the second week of April 2019. On the other hand, scheduled monthly cash outflow (including loan repayment and securitisation payouts) till June 2019 remains high at an estimated Rs 9,900 crore. Additionally, a portion of the non-convertible debentures (NCDs) raised by DHFL has triggered acceleration clauses linked to downgrades in the NCDs’ long-term ratings. Any exercise of option by investors would materially increase the scheduled outflow. Crisil understands that DHFL has already engaged with investors to alleviate this risk. With liquidity being lower than envisaged, sensitivity around timely receipt of funds from various initiatives has increased significantly,” added Crisil in the statement.

Senior officials in the mutual fund industry say fund houses have not marked down any of the investments now as they have not yet downgraded to default.

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