INSUBCONTINENT EXCLUSIVE:
Mumbai: Domestic rating agency Icra has placed ratings of six mutual fund schemes under watch with negative implications due to their
exposure to crippled infra lender ILFS group entities.
The schemes being put under watch include a short term debt funds and banking and PSU
debt funds from HDFC, banking and PSU debt fund, bond fund, dynamic bond funds from UTI, Aditya Birla Sun Life short term opportunities
fund, Icra said in statement Tuesday.
The rating action is due to "deterioration in credit quality" of underlying investments of these
schemes driven by their exposure to special purpose vehicles (SPVs) of ILFS Group, agency said.
These schemes have exposure to Hazaribagh
Ranchi Expressway, Jharkhand Road Projects Implementation Company, and Jorabat Shillong Expressway, agency said.
"The default risks by
various SPVs of ILFS have increased after recent management communication to trustees expressing to stop future repayments citing their
interpretation of an order given by National Company Law Appellate Tribunal on October 15, 2018," agency explained.
Two SPVs of ILFS
demanded a refund of debt payment executed by them after October 15, 2018 from their trustees, it added.
"Despite a ring-fenced structure
and adequate cash flows to service debt obligations, these SPVs have asked trustees to stop debiting SPVs escrow account towards its future
obligations," it said.
The exposure of two HDFC funds to Hazaribagh Ranchi Expressway stood at 0.55 percent and 0.29 percent of their AUMs,
respectively, as of end December, it said.
The same for three UTI funds to Jorabat Shillong Expressway stood at 6.87 percent, 5.98 percent
and 6.25 percent of AUM, according to Icra.
The Aditya Birla Sun Life short term opportunities fund has an exposure to Jharkhand Road
Projects Implementation Company stood at 1.15 percent, it added.
In case of delays in honouring its obligations by these SPVs, their ratings
are likely to be downgraded, impacting credit scores of these MF schemes, it said.
The key rating driver will be ability of these schemes to
rebalance portfolios within a month of any rating action, agency said, adding it will continue monitoring portfolios.
It can be noted that
ILFS group, which has debt outstandings of over Rs 94,000 crore, which has not been serviced since September last, has been defaulting on
its payment commitments since August last year
Initially, exposure to SPVs which are delivering steady cash flows were considered to be among safer bets taken by financiers.
