The net asset values (NAVs) of some schemes in the debt and hybrid categories of Reliance Mutual Fund and SBI Mutual Fund dipped by 0.88% to 3% on May 28, reflecting the mark down in securities of Reliance Home Finance and Reliance Commercial Finance after rating downgrades.These fund houses have marked down their holdings in these securities by 55% in line with regulatory guidelines, said industry sources.
Rating agency CARE cut its ratings on Reliance Home Finances long-term debt programme of 4,979 crore and long-term bank facilities and non-convertible debentures of Reliance Commercial Finance worth 12,700 crore to default.Reliance Ultra Short Term funds NAV slipped by 1.22%, Reliance Credit Risk Funds NAV dropped by 2.28%, Reliance Strategic Debt fund fell by 2.7% and Reliance Hybrid Bonds NAV shed 1.02%.
A spokesperson for Reliance Nippon AMC said, Once we receive the funds and securities are repaid, the valuation will be written back and all investors who remain invested in the MF schemes will not be impacted at all.In the case of SBI Mutual Fund, SBI Credit Risk Fund saw its NAV fall by 0.88% and SBI Debt Hybrid Funds NAV dropped by 0.91%.
Reliance Nippon has an exposure of 1,546 crore to the securities of Reliance Home Finance and Reliance Commercial Finance while SBI Mutual Fund holds paper worth788 crore.
It could not be ascertained by what percentage the fund house marked down the securities.All our securities are valued in line with SEBI/AMFI guidelines, said a spokesperson for SBI MF.Both fund houses did not offer any comment on the exact amount by which they marked down the securities.This is the third instance where debt mutual fund investors have been hit in the last one year.
After ILFS was downgraded to default, fund houses holding the security wrote off their investments leading to losses for investors in various debt schemes, which held these papers.
Fund houses have given time to Subhash Chandras Essel group till September to pay their liabilities.
Some fixed maturity plans (FMPs), which held Essel Group papers, had to return lesser money to investors after they matured recently, while one fund house rolled over its FMP by a year.The default effectFund nameFall in NAV (in %)Reliance Ultra Short Term-1.23Reliance Credit Risk-2.28Reliance Strategic Debt-2.71Reliance Hybrid Bond-1.03SBI Credit Risk-0.88SBI Debt Hyrbrid-0.91Source: Value Research; as on April 30, 2019