IL&FS downgrade to hit MFs’ 1,200 cr. investments


Mumbai, SEP 11:
The recent downgrade of Infrastructure Leasing & Financial Services (IL&FS) and IL&FS Financial Services has put at risk mutual fund investments worth more than ?1,200 crore with fund houses like ICICI Prudential Mutual Fund, LIC Mutual Fund, Principal Mutual Fund, Motilal Oswal Mutual Fund and Tata Mutual Fund having exposure to the commercial paper or debentures issued by these firms.
According to data from Value Research, while ?1,226 crore is the exposure to the debt papers of IL&FS and IL&FS Financial Services, the overall exposure of fund houses towards the group is almost ?3,500 crore.
Group’s obligations
While the two firms have already been downgraded by rating agencies, three other companies — IL&FS Transportation Networks, IL&FS Tamil Nadu Power Company and IL&FS Securities Services — have repayment obligations towards fund houses. On Sunday, rating agency ICRA downgraded IL&FS as well IL&FS Financial Services, citing factors like high debt levels and liquidity pressure at a time when the companies are facing sizeable debt-servicing obligations.
Post downgrade, fund houses have to mark down the net asset value of the scheme, which impacts the return on investment for the investors in that scheme.
Tata Mutual Fund, in a note to its clients, wrote that it was closely monitoring the liquidity position of IL&FS Group, which, as per the fund house, is in “discussions to manage liquidity through debt funding to tide over repayments for the near term.


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