Debt mutual funds could be forced to postpone redemptions in many schemes over the next three months as up to 15 percent of their assets under management is accounted for by four stressed companies - Dewan Housing Finance, Essel group, IL&FS and Anil Dhirubhani Ambani group.
These four companies together owed Rs 3.6 lakh crore to lenders in the end of March 2018. A significant part of this debt is sitting on the books of mutual funds and analysts fear that MFs may find it difficult to recover their money on time as well as in full. This will impact investors in the debt MF schemes with exposure to these stressed firms.
"Mutual funds have significant exposure to some of the stressed companies (Dewan, Essel, IL&FS & ADA Group), accounting for 4-15 per cent of AUM for some of the AMCs. In addition to the MF exposure, the exposure to four stressed groups for the banks and NBFCs is large, at 1 to 6 per cent of loans and 10-50 per cent of net worth," Credit Suisse said in its latest report.
Lenders with significant exposures to these entities are IndusInd Bank, Yes Bank, L&T Finance and Edelweiss, it added.
In all, MFs have Rs 3.2 lakh crore exposure to NBFCs (including Housing Finance Companies) and Rs 1.3 lakh crore of this matures over the next three months. NBFCs, excluding HDFC, LIC and Bajaj Finance, have Rs 1 lakh crore or about 47 percent of MF exposure maturing over the next three months, the report said.
"Some of the NBFCs are seeing a sharp increase in MF borrowings due over the next three months. While Dewan had minimal (Rs200 crore) MF funding maturing in the January-March 2019 quarter, they are seeing a large quantum Rs 3,300 crore of MF exposure maturing over the next three to six months," the report pointed out.
Earlier this month, Kotak Mahindra Asset Management and HDFC Mutual Fund said investors in some of their fixed maturity plans (FMPs), would not be able to redeem all their units, due to delay in recovering money lent to the Essel Group companies. Debt mutual funds have over Rs 5,700 crore exposure to debt-laden Essel group alone, according to Value Research.
In such a scenario, it is very likely that investors may have to face redemption postponement in other schemes soon.