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BOI AXA MF erroneously calculated NAV of conservative hybrid fund

To make correction, the MF will credit additional amount.

February 20, 2020 / 04:07 PM IST

BOI AXA Mutual Fund had wrongly calculated the net asset value (NAV) of its BOI AXA Conservative Hybrid Fund while writing off exposure to a Sintex group company.

The fund said so in a written communication to distributors and investors. Moneycontrol is in possession of a copy of the letter dated Feb 18th.

In a letter, the fund house stated, "As communicated in our earlier note released on June 26, 2019, owing to the downgrade of the credit rating in the securities of Sintex BAPL Limited (Sintex BAPL), a Sintex group company, we had marked the securities down to NIL value to protect existing unit holders. At that time, inadvertently, there was an excess amount that was marked down for a few of the bonds of Sintex BAPL resulting in a lower NAV due to this error."


Following the error, the fund house said that all unit holders who redeemed or switched out between June 26, 2019, to February 14, 2020, will be paid an additional amount owing to the lower than applicable NAV received by them. This amount will be credited to the investor’s bank account.


"Furthermore, all unitholders who have purchased units in the above funds have received additional units due to the lower than applicable NAV. The AMC is crediting the funds wherever applicable for all purchases made by investors after June 26, 2019, on account of this shortfall," the letter stated.

When Moneycontrol reached out to the fund house, BOI AXA MF said, "We have completed the compensation process wherever applicable."

Last year in June, Sintex Industries defaulted on its repayment of Rs 89 crore worth of NCDs. That led to a 55 percent markdown of the mutual fund house’s investments in Sintex BAPL.

The value of the fund’s holdings in Sintex securities in June last year was Rs 140 crore before the mark-down.

Post the default, most rating agencies had downgraded the paper.

Brickwork Ratings downgraded Sintex BAPL’s instruments to ‘C’, citing non-receipt of no dues statement from the company and deterioration in its standalone operating performance.

“For a NAV error, there are implications for investors since June 26 2019 i.e. more than 6 months. So AMCs have to be diligent in NAV calculations as longer delays will have interest rate implications also for NAV errors caused payout redemptions,” said an ex-SEBI officer working in a mutual fund department.
Himadri Buch
first published: Feb 20, 2020 02:40 pm

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