Mutual Funds’ Rs 140 crore investments in DHFL to mature today

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New Delhi | Published: June 25, 2019 1:14:01 AM

Lenders to DHFL are expected to meet in the first week of July to chart out recovery plans .

money market fund, idbi, value research dataSchemes such as L&T Money Market Fund, IDBI Ultra Short Term Fund, DSP Strategic Bond Fund, DSP Credit Risk Fund and DSP Low Duration Fund have invested in CPs of DHFL which will mature on June 25, Value Research data shows

Investments in commercial papers (CPs) of Dewan Housing Finance Corporation (DHFL) worth over Rs 140 crore, by fixed income mutual funds, are set to mature on Tuesday (June 25). Data from Value Research shows that mutual funds have invested around `3,300 crore in various debt paper issued by DHFL as on May 31, 2019.

Schemes such as L&T Money Market Fund, IDBI Ultra Short Term Fund, DSP Strategic Bond Fund, DSP Credit Risk Fund and DSP Low Duration Fund have invested in CPs of DHFL which will mature on June 25, Value Research data shows. Fund managers who have invested in commercial papers of DHFL said on condition of anonymity they would need to wait till Tuesday to get a clear picture. “We are hopeful that DHFL will pay the money on maturity as they have paid the entire amount on the CPs which matured last week,” a senior fund manager said.

Lenders to DHFL are expected to meet in the first week of July to chart out recovery plans which will include the reworking of loan payments, fresh working capital support and roping in a financial investor.
Market participants say that on June 4, 2019, DHFL had interest and principal payments due to the tune of approximately Rs 1,100 crore to the industry/investors and the company failed to repay on the scheduled date. Later, several of the debt mutual funds had mark-down around 75%-100% of the value of the assets.

As per Securities and Exchange Board and Reserve Bank of India (RBI) regulations, if even one day’s principal or interest is delayed it is effectively a default. Later on June 11, DHFL said it has paid `961.95 crore towards interest payable on secured redeemable non-convertible debentures (NCDs). According to the filing on the exchanges, DHFL had stated that, payments were made within the cure period of seven working days.

On June 5, 2019, CRISIL, ICRA and CARE had downgraded its rating on the Commercial Paper (CP)/non-convertible debentures (NCD) of DHFL to ‘D’, based on delay in debt servicing due to inadequate liquidity, modest capital position and modest earnings. The rating revision takes into account the recent instance of delay in servicing of obligations with respect to some of the non-convertible debentures by DHFL due to prolonged liquidity stress.

DSP MF in its note on June 5 had stated, “A substantial portion of DHFL holdings in schemes of DSP Mutual Fund mature on June 25, 2019. In the event of an upward revision in markdowns, the valuation of these securities will see a significant rise.

Any inflows at this juncture (when valuations are marked down to zero), if followed by upward revision in markdowns will dilute the return profile of existing investors on the schemes. DSP MF had announced temporary suspension of lumpsum subscription in DSP Credit Risk Fund, DSP Low Duration Fund and DSP Strategic Bond Fund.”

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