Mutual funds (MFs) are not worried after a Delhi High Court ruling granted protection to Indiabulls Housing Finance from any coercive action if it failed to make payments to debenture holders.  Sources in the MF industry said Indiabulls Housing Finance has continued to honour the payments on maturities and they see no stress at this point of time.

“We had approached the Delhi High Court on grounds of principle and not as an outcome of any other stress. Since our inflows have been blocked by a regulatory initiative, why should our outflows also not be blocked,” an Indiabulls Housing Finance spokesperson said.

Data from Value Research show that total investments by MFs in debt papers issued by Indiabulls Housing Finance stand at Rs 1,150 crore as on March 31. According to the company, they continue to pay their debenture holders, including redeeming bonds which matured on April 20.

On March 27, the Reserve Bank of India (RBI) had granted a moratorium of three months on payment of all instalments falling due between March 1 and May 31 this year. All commercial banks, cooperative banks, all-India financial institutions and NBFCs have been permitted to offer borrowers a moratorium on repayments. The petition filed by Indiabulls Housing Finance, which argued that it had become impossible to recover debts owed to it by various institutions due to the lockdown and the RBI circular dated March 27.

Fund houses such as HDFC MF, Baroda MF, Nippon India MF, PGIM MF and UTI MF have exposures to debt papers issued by the Indiabulls Housing Finance, shows the data from Value Research.

“Right now, this issue will not have any impact on our portfolio as most of the maturities in our funds are in the second half of this calendar year and next year. In the past, Indiabulls Housing Finance has honoured all the payments, which include interest and the principal, so there is nothing to worry as of now,” head (fixed income) of a leading fund house said on condition of anonymity. This fund manager has exposure in the debt papers issued by Indiabulls Housing Finance.

The Indiabulls Housing Finance spokesperson also said, “We are optimistic that with the announcement of targeted long-term repo operations (TLTROs) and the initial signs we are getting, we won’t have to dip into our liquidity buffers to service our principal on bonds or any other instrument.”

Indiabulls also said over the last 19 months, including March 2020, “we are the only NBFC to have bought back our own paper of over `7,000 crore and still have continued to remain the most liquid”.