Indian fund houses have exposure of over Rs 8,500 crore to Dewan Housing Finance Corporation (DHFL) group companies. Of the total amount, around Rs 7,100 crore is invested in debt papers of DHFL by around 292 debt schemes, while the remaining is invested in Wadhawan Global Capital, Avanse Financial Services and Aadhar Housing Finance.

UTI Mutual Fund has investments of around Rs 2,144 crore in various group companies of DHFL Group across 51 debt schemes. Reliance Mutual fund has an exposure of `1,488 crore in DHFL.

Data from B&K Securities as on December 2018 showed that Axis Mutual Fund has invested around Rs 772 crore in debt schemes of DHFL while DHFL Pramerica Mutual Fund has an exposure of around Rs 375 crore.

B&K Securities specialises in advising the treasuries of corporate and institutional investors.
Rating agency CARE has downgraded Rs 1.2 lakh crore of various debt papers, such as non-convertible debentures, perpetual debt and fixed deposit programme, issued by DHFL.
“The revision in the long-term ratings takes into account moderation in financial flexibility of Dewan Housing Finance Corporation (DHFL) as evidenced by sharp reduction in its share price and significant rise in bond spreads.

While stock prices and credit spreads were negatively affected for NBFCs and HFCs post September 2018, recent media news related to DHFL has further impacted market sentiment. DHFL’s ability to raise resources at competitive rates would be crucial for its profitability and long-term growth prospects going forward,” said the press release from CARE Ratings.

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Fund houses such as Aditya Birla Sun Life Mutual Fund, L&T Mutual Fund, Kotak Mutual Fund, Franklin Templeton Mutual Fund among others have exposure to DHFL or its group companies.

“We do not foresee any challenges in the near term based on our assessment of liquidity profile of the company. Most of our exposure matures in next 12 months. Having said that we will make every attempt to rationalise our exposures at a scheme level where there is above-average concentration of the paper from a point of view of diversification,” said Kumaresh Ramakrishanan, head – fixed income at DHFL Pramerica Mutual Fund.

CARE Rating, in an a separate note, observed that along with the rise of AUM and growth of NBFC over the past few years, the overall exposure of MFs in NBFCs has almost tripled from Rs 70,000 crore in March 2014 to Rs 2.2 lakh crore in March 2018.

In percentage terms, share of commercial papers and corporate debt papers of NBFCs to total funds deployed rose from 14.3 percent in March 2014 to 17.6 percent in March 2018.

“After the liquidity crisis triggered in the NBFC space, fund houses gradually started reducing their exposure to their commercial paper,” said the report.