Birla MF stops inflow into two debt schemes to protect investor interest

Suresh P Iyengar Mumbai | Updated on May 22, 2020 Published on May 21, 2020

The fund house will still honour redemptions in the two schemes

In a rare investor-friendly move, Aditya Birla Mutual Fund has suspended fresh inflow into two of its debt schemes — Medium Term Plan and Credit Risk Fund, as it expects recovery in some of its investments that had gone bad earlier.

However, the fund house will continue to accept inflows through systematic investment plans (SIPs) and systematic transfer plans (STPs) registered before Thursday.

At a time when the mutual fund industry is scouting for inflows, Birla Mutual Fund has stopped accepting investments while keeping open redemption for investors who want to exit.

A Balasubramanian, MD and CEO, Aditya Birla Sun Life AMC, said there are substantial gains in few funds which would be realised by the existing investors over the next few months.

“Since we do not wish to dilute this for existing investors by taking more money in these funds, we have stopped fresh subscriptions in these funds,” he said.

The Credit Risk Fund has an AUM of ₹2,200 crore and the Medium Term Plan ₹4,200 crore.

Due to multiple write-downs, Medium Term and Credit Risk schemes of Aditya Birla Mutual Fund have one-year returns of 0.59 per cent and -8.48 per cent.

Default blues

The debt schemes of the mutual fund industry have been in the eye of a storm for the last two years due to a series of defaults by large corporates.

Of late, Franklin Templeton had to suddenly close six of its debt schemes due to huge redemptions amid severe liquidity crunch.

In fact, Aditya Birla Mutual Fund had debt exposure to few of the companies that had defaulted in 2018 and had to mark down the value of these assets, leading to sharp erosion of up to 25 per cent in the net asset value (NAV) of these schemes.

While the fund house managed to recover money from some of the corporates, it is expecting major returns from its investments in the special purpose vehicle of IL&FS.

The fund house is expecting inflows of ₹950 crore in IL&FS subsidiary Jharkhand Road Projects Implementation Company which has now agreed to service both principal and interest.

Similarly, its investments in IL&FS subsidiaries in power and education are also turning around and are expected to repay their debt. These inflows, as and when they happen, will push up the NAVs of the schemes and the fund house does not want tactical investors to walk away with long investors’ gains, said an analyst.

Published on May 21, 2020

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
  1. Comments will be moderated by The Hindu Business Line editorial team.
  2. Comments that are abusive, personal, incendiary or irrelevant cannot be published.
  3. Please write complete sentences. Do not type comments in all capital letters, or in all lower case letters, or using abbreviated text. (example: u cannot substitute for you, d is not 'the', n is not 'and').
  4. We may remove hyperlinks within comments.
  5. Please use a genuine email ID and provide your name, to avoid rejection.
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.