Investors jittery over ₹2,800-crore mutual fund investments in IL&FS

Surabhi |Suresh P. Iyengar | | Updated on: Dec 06, 2021

Uncertainty looms on the prospects of 33 debt and hybrid schemes

Notwithstanding the runaway success of the ‘ Mutual funds sahi hai ’ campaign, most investors in debt schemes of top mutual funds are a worried lot due to the mark-down in their investments.

Uncertainty looms on the prospects of 33 debt and hybrid schemes of 12 mutual funds that have pumped ₹2,800 crore into the debt securities of troubled Infrastructure Leasing & Financial Services and its group companies which have been downgraded recently.

The exposure of ₹2,405 crore to the top six mutual funds — LIC MF, DSP MF, Aditya Birla MF, Tata MF, Principal MF and HSBC MF — accounts for 86 per cent of the overall investment in IL&FS.

A Balasubramanian, CEO, Aditya Birla Sun Life AMC, said the fund house remains vigilant and is continuously monitoring the exposure.


Credit risk funds

The impact on Aditya Birla MF’s investors would be limited, given the investments are in the operating units IL&FS Tamil Nadu Power Company and IL&FS Education and Technology Services, with a clear cash flow into escrow account. The credit risk funds earn about 2.5 per cent extra over AAA-centric funds every year, he said.

“While our fund managers ensure no investments go wrong, a small drawdown due to mark-to-market (MTM) loss will take away a small part of the excess spreads,” he said.

Aashish Somaiyaa, CEO, Motilal Oswal AMC, said its exposure of ₹98 crore towards the commercial paper issued by the parent IL&FS will mature before January.

“We have received full payment for the commercial paper that matured on September 10 and the revised exposure is now about ₹74 crore,” he said.

The other commercial papers do face MTM impact by virtue of the rating downgrade. As a result, there was MTM impact of about 1.86 per cent on NAV declaration.

“We are expecting full repayment for the next maturity due on September 26 and the NAV should start restoring,” he added.

Dhirendra Kumar, CEO, Value Research, said the overall mutual fund investments in IL&FS is very small compared to their assets under management and so the impact would be limited.

In the past, downgrades of Amtek Auto, Jindal Steel & Power and Ballarpur Industries had badly hit the portfolios of some mutual funds.

The fresh trouble in mutual funds has arisen when the Association of Mutual Funds in India is planning to launch a campaign this month to promote debt schemes on the lines of the ‘ Mutual funds sahi hai ’ campaign.

Published on September 12, 2018
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