In order to safeguard the interests of the existing investors in its funds, UTI MF has introduced an exit load with immediate effect from June 07
UTI Mutual Fund increased Dewan Housing Finance Ltd's (DHFL) markdown from 75 percent to 100 percent on debt securities that have exposure to the debt papers of DHFL. The move comes after delay on interest and principal payout on maturity by DHFL.
"In light of this development, UTI MF anticipates enhanced pressure and legal action on DHFL from all creditors, including the exercise of early redemption clause and legal options by various lenders. This is expected to further delay the company's recovery efforts in the disposal of its assets in an orderly manner," the release stated.
DHFL was to make interest and principal payments to the tune of Rs 1,100 crore to the industry/investors but failed to repay on June 04, the scheduled date. Given that such delay warranted mutual funds to mark down the net asset values (NAVs) of DHFL bonds by 75 percent, it led to a 30-40 percent single-day fall in NAV of schemes that invested in DHFL debt papers.
As a result, CRISIL, ICRA and CARE Ratings downgraded their rating on DHFL's Commercial Paper (CP) / Non-Convertible Debentures (NCD) to 'D', based on delay in debt servicing due to inadequate liquidity, modest capital position and modest earnings.
The rating revision took into account the delay in servicing of obligations with respect to some of the NCDs by DHFL due to prolonged liquidity stress. The fund house also said that there is no secondary market for such securities in the current scenario.
Considering the high level of uncertainty about the recovery timeline and value, UTI MF has increased the markdown to DHFL debt securities from 75 percent to 100 percent in schemes which have exposure to DHFL.
"If there is any recovery in the future, the provision will be written back to the scheme(s) on actual receipt basis," UTI MF added.
As per data on AceMF, as on June 06, 254 schemes had exposure to DHFL's debt instruments with a total investment of Rs 6,122 crore across 25 mutual fund houses.
Among these 25 MFs, UTI Mutual Fund has the highest exposure worth Rs 1,730 crore in DHFL’s debt papers as on June 06.
Imposes Exit Load
In order to safeguard the interests of existing investors in its funds, UTI MF has introduced an exit load in the UTI Treasury Advantage Fund, UTI Ultra Short Term Fund, UTI Short Term Income Fund, UTI Dynamic Bond Fund and UTI Bond Fund with immediate effect from June 07.These six schemes will levy 3 percent exit load if investments are redeemed within three months, 2 percent if redeemed within three to six months, 1 percent if redeemed within six months to one year, and nil thereafter. Earlier, these schemes did not levy any exit load on redemption.The Great Diwali Discount!
Unlock 75% more savings this festive season. Get Moneycontrol Pro for a year for Rs 289 only.
Coupon code: DIWALI. Offer valid till 10th November, 2019 .