INSUBCONTINENT EXCLUSIVE:
The prospects of debt mutual funds are back in focus after Kotak Mutual Fund’s fixed maturity plans (FMPs) failed to return investors’
entire money on account of delay in repayment by two Essel group companies
In the past too, investors in various debt schemes have been affected by ratings downgrades of investments, defaults or delay in repayments
ET looks at such instances.
Amtek AutoMF: JP Morgan TIME: August 2015 SCHEMES: JP Morgan India Short Term Income Fund and JP Morgan India
Treasury Fund FALL IN NAV: 1-3%BRICKWORK RATINGS brought down its rating to C from A+, while CARE suspended coverage of Amtek Auto
Soon, JP Morgan side-pocketed the Amtek Auto exposure and allotted units to investors
In December, JP Morgan sold Amtek Auto bonds at 85% of the value
Investors, who stayed invested in the scheme since May 2015, did not lose capital in the fund.
Ballarpur IndustriesMF: Taurus Mutual Fund
TIME: February 2017 SCHEMES: Four debt schemes of Taurus Mutual Fund FALL IN NAV: Up to 11%INDIA RATINGS and Research downgraded Ballarpur
Industries’ long-term issuer rating to ‘IND D’ from ‘IND BBB-’
Non-convertible debentures (NCDs) and commercial paper of the company saw a downgrade from ‘IND C’ from ‘IND BBB-’ and ‘IND A3’
Investors in Taurus Dynamic Income Fund, Taurus Ultra Short Term Bond Fund, and Taurus Short Term Income saw their NAVs dip by as much as
11% in a single day.
ILFS GroupMF: LIC, DSP, Aditya Birla, Tata, Principal, HSBC, BOI Axa, Motilal Oswal and InvescoTIME: September 2018
FALL IN NAV: 7%Due to the rating downgrades of ILFS group papers to D, many mutual fund schemes had to mark-to-market their holdings
Investors suffered a loss with the NAVs of these schemes falling by as much as 3-7% in a single day.
JSPLMF: Franklin Templeton TIME:
February 2016 SCHEMES: Six debt schemes of Franklin Templeton held 2-7% of their assets in JSPL FALL IN NAV: 3%JINDAL STEEL and Power (JSPL)
Crisil downgraded JSPL’s long-term rating from BBB+ to BB+ and the rating deteriorated to default status in a month
Schemes of Franklin Templeton Mutual Fund saw their NAV dip by nearly 1-3% in a day
Franklin sold off the two securities completely from the schemes in two tranches on February 29, 2016 and March 10.
Zee /Essel groupMF:
Aditya Birla, Kotak, HDFC, Franklin Templeton, Reliance, SBI, Baroda, ICICI Prudential TIME: January 2019 FALL IN NAV: NAMutual funds have
given time till September 30 to the promoters of Zee /Essel group to seal a deal and pay them their dues
FMPs of Kotak Mutual Fund that matured in April and May will pay back investors minus the value of their holding in Zee /Essel group, while
HDFC MF has rolled over one of its FMP
Open-ended schemes of mutual funds continue to hold securities of Zee /Essel group.
