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MUMBAI: Credit Suisse believes that debt mutual funds could see a second wave of risk aversion in three months and volatility in flows because of their exposure to Dewan Housing Finance (DHFL), the home financier whose stock has plunged recently.
A Credit Suisse report said that DHFL is among the largest borrowers from mutual funds and the aggregate exposure of debt mutual funds to the home financier’s securities is Rs 8,500 crore.
That amounts to about 0.7 per cent of debt mutual funds’ assets under management as of December 2018.
By contrast, the banking sector exposure is of Rs 40,000 crore.
To be sure, the exposure for some fund houses is larger, at 2-10 per cent of total debt AUM, with some schemes having up to 30 per cent of their AUM invested in Dewan securities.
The report mentions that some schemes have taken mark-to-market losses on this exposure after the Dewan paper was being repriced at higher yields.
Analysts believe if this continues and leads to redemption pressure from mutual funds, investors would turn risk averse toward debt mutual funds.
Debt AUMs were down about 11 per cent in December.
With 30 per cent of the mutual fund debt AUM invested in NBFCs/HFCs, rising scrutiny of credit risk at debt funds is likely to keep flows rather volatile, constraining NBFC funding that still relies on mutual funds for 10-30 per cent of their borrowings.
While mutual funds reduced exposure to NBFCs/ HFCs by 15 per cent since August, they have seen a rise in some names while Dewan has seen a 60 per cent reduction.
The DHFL case has started featuring prominently in the media just a week after the Essel group stocks collapsed on concerns over share pledges by the promoter.
