Not a single default or delay in debt repayment, says ICICI Prudential chief

Suresh P Iyengar Mumbai | Updated on January 06, 2020

Nimesh Shah, MD and CEO of ICICI Prudential Asset Management Company

ICICI Mutual Fund plays it safe, avoid debt crisis

Notwithstanding the series of corporate debts, ICICI Mutual Fund has advised investors to consider debt mutual fund schemes as it feels the current crisis is an individual case and not systemic failure of the entire mutual fund industry.

Speaking to media, Nimesh Shah, Managing Director, ICICI Prudential AMC, said it managed volatility and contained risk in recent times by not chasing higher yields and followed an independent assessment of credit risk.

For debt fund investors, safety must be paramount, followed by liquidity and then returns.

In the case of DHFL, which had defaulted on debt repayment, Shah said ICICI MF has decided to keep away from the debt papers of the company just by glancing at its balance sheet.

“The alarm bell rang when we saw its equity base of ₹8,000 crore and a debt of ₹1-lakh crore,” he said.

In fact, Shah said in the last 20 years ICICI Mutual Fund did not have even a single default or delay in payment of interest in any of its schemes. Currently, corporates are constrained by credit availability and this is the best time to invest in credit risk and debt fund, he said.

ICICI MF debt AUM (excluding liquid and overnight) has grown 35 per cent while that of the MF industry decreased 15.5 per cent. The biggest issues with some mutual funds impacted by the recent credit defaults was their reliance on external rating agencies and higher yield-to-maturity (YTM) than ICICI MF schemes, he said.

The credit risk portfolio of ICICI MF is well diversified across 85 securities to mitigate risk.

The performance of debt funds in the last one to two years can be a good indicator for investors to decide on their investments, he added.

Given the concentrated rally in equity markets, S Naren, Chief Investment Officer, said investors have to moderate their equity returns expectation as there are lot of uncertainties that is clouding the growth.

Small-caps’ time

The ongoing US-Iran stand-off can drag down Indian equities and the geopolitical issues are very difficult to predict. Given the concentrated rally in the stock market, the fund house has termed the top 15 stocks of Nifty as mega-caps and expects these stocks to become overpriced.

After two years of underperformance, small-caps are expected to play a dominant role in wealth creation in the next three-five years.

The only issue in the small-cap space is lack of liquidity which is slowly getting resolved, he said.

Published on January 06, 2020

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