In January, the fund house cut its investment value in the SPV by 25 percent
For the second time in four months, UTI Mutual Fund marked down on its exposure to IL&FS SPV (Infrastructure Leasing & Financial Services’- Special Purpose Vehicle) — the Jorabat Shillong Expressway (JSEL) — by an additional 25 percent, taking its total write-down to 50 percent.
In January, the fund house cut its investment value in the SPV by 25 percent after CRISIL downgraded its rating on the non-convertible debentures (NCDs) of Jharkhand Road Projects Implementation to D from BB(SO)/ Watch Negative.
In an emailed response to Moneycontrol, the fund house explained its rationale saying, “As per the new SEBI circular dated March 22, and AMFI best practices circular dated April 30 on standard haircut for sub-investment grade securities in the infrastructure sector with a current rating of D, all mutual funds have to apply a haircut of 50 percent till such time the valuations agencies/rating agencies compute their valuation. In order to comply with the above guidelines for sub-investment grade securities, UTI had taken an additional 25 percent haircut on the NCDs of JSEL on April 30.”
Consequently, the net asset values of the six schemes were hit.
On April 30, the NAV of six schemes from UTI Mutual Fund were hit between two percent and six percent. UTI Banking & PSU Debt Fund’s NAV fell 6.7 percent, followed by UTI Dynamic Bond Fund, which witnessed a 2.79 percent fall in NAV.
The NAV fell as these schemes had an exposure between five percent and 16 percent to the assets of the IL&FS SPV.
Reassuring investors, the fund house said it is a senior secured lender to JSEL, which is backed by annuities from National Highway Authority of India (NHAI). “JSEL’s current cash and bank balance are more than sufficient to service the liabilities of all senior secured lenders. As JSEL is currently under National Company Law Appellate Tribunal (NCLAT) preview, payments towards senior secured lenders would only begin post the final order from NCLAT.”The total exposure of UTI Mutual Fund to IL&FS group stands at Rs 431 crore while the exposure of the mutual fund industry stands at Rs 1,473 crore. Apart from UTI Mutual Fund, Aditya Birla Sun Life Mutual Fund, HDFC Mutual Fund, among others have an exposure to the IL&FS Group.Not sure which mutual funds to buy? Download moneycontrol transact app to get personalised investment recommendations.