Page 15 - Banking Finance July 2019

MUTUAL FUND

42% decline registered by UTI MF increases mark- down its debt exposure to
open-ended debt mutual DHFL
UTI Mutual Fund has increased the mark-down in terms of its debt exposure to
in net inflows
DHFL from 75% to 100%. The fund house has also in-
AMDI has revealed that open-ended
troduced an exit load for five fixed income schemes to
income or debt-oriented schemes has
help safeguard the interests of existing investors. Data
seen a 42% month-on-month fall in net
from Value Research reveals that in April 2019, UTI MF
inflows. Against the net inflows of Rs
had an exposure of over Rs 1,200 crore to DHFL, across
1,20,920 crore in April, the net inflows
schemes.
for May stood at Rs 70,119 crore.
Lack of faith in debt schemes follow- DHFL had failed to repay interest and principal of approximately Rs 1,100 crore
ing a series of defaults has been un- due on June 4, 2019. A press release by UTI MF stated, “As per the standard
derscored by the fall in net flows. haircut table for sub-investment grade debt securities which has been provided/
finalized by valuation agencies (CRISIL and ICRA) and AMFI, UTI MF had taken
During the month of May, most debt
a 75% markdown to DHFL debt securities in the schemes that have an expo-
mutual fund categories like low du-
sure to DHFL.”
ration funds, short duration funds,
medium duration funds, medium to CRISIL, ICRA and CARE downgraded the rating on the commercial paper (CP)/
long duration fund, dynamic bond non-convertible debentures (NCD) of DHFL to ‘D’ on June 5, 2019, owing to the
fund, credit risk funds and gilt funds delay in debt servicing due to inadequate liquidity, modest capital position and
have seen net outflows. 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
Meanwhile, net outflows have also
debentures by DHFL due to prolonged liquidity stress.
been faced by fixed term plans con-
tinuously. The category has seen net “In light of the above development UTI MF anticipates that there would be
outflows to the tune of Rs 1,798 enhanced pressure and legal action on DHFL from all creditors, including exer-
crore in May, as against Rs 17,644 cise of early redemption clause and legal options by various lenders. This is ex-
crore April. pected to further delay the recovery efforts of the company in disposal of its
assets in an orderly manner.
Equity mutual funds have seen a 17%
growth in their monthly net inflows Furthermore, there is no secondary market for such securities in the current
from Rs 4,609 crore in April to Rs scenario. Considering the high level of uncertainty as to recovery timelines and
5,408 crore in May. ELSS or tax sav- value, UTI MF has increased the markdown to DHFL debt securities from 75%
ing equity schemes received net in- to 100% in the schemes which has an exposure to DHFL. If there is any recov-
flows worth Rs 1,310 crore in May. In ery in future, the provision will be written back to the schemes on actual re-
April ELSSs received Rs 1,354 crore. ceipt basis,” UTI MF said in the press note.

BANKING FINANCE | JULY | 2019 | 15