PGIM India funds down 21-30% after downgrade of Anil Ambani's firm

The ratings downgrade of Anil Ambani group firm Reliance Business Broadcast News Holdings (RBBNH, which owns Business Broadcast News) has led to a steep drop in the net asset values (NAVs) of mutual fund (MF) schemes with concentrated exposure to its debt papers.

Two of PGIM India’s funds saw a 21-30 per cent drop in NAVs on Friday, following the downgrade. As of end-August, 23 schemes had Rs 583 crore of exposure to RBBNH’s debt papers, data sourced from Rupeevest showed.

Among individual schemes, PGIM India Ultra Short-Term Fund that has 100 per cent exposure to RBBNH’s debt paper saw a 30 per cent drop in its NAV. PGIM India Short Maturity Fund, with 64 per cent exposure to the debt paper, saw a 21 per cent dip in its NAV.

The asset size of these schemes had shrunk significantly due to a sharp outflow after the liquidity crisis triggered by the IL&FS defaults of the last year. As a result, these schemes are left with concentrated exposure to relatively illiquid assets.

In a note PGIM India MF said, “Given the change in rating valuation of the bonds of RBBNH have been marked down by 50 per cent as per the standard valuation matrix, applicable for loan against share structures.”

The note added that the fund house had outstanding exposure aggregating Rs 289 crore to two Anil Ambani group firms — RBBNH and Reliance Commercial Finance. Of this amount, Rs 134 crore has been received and payment of Rs 15 crore will be received on Monday. The principal exposure would stand reduced to Rs 149 crore, the note added.

Overall, nine schemes of PGIM India (formerly DHFL Pramerica MF) were exposed, with aggregate exposure at Rs 202 crore. PGIM Low Duration Fund, which had 18 per cent of scheme assets exposed, saw a 6.2 per cent drop in its NAV. Apart from these, four fixed maturity plans (FMPs) of the fund house were also exposed to RBBNH.

On Friday, CARE Ratings downgraded the non-convertible debentures (NCDs) of RBBNH to ‘D’ or default grade. Its note said the revision in rating accounted for the delay in debt servicing of one of the NCDs that matured on September 11.

UTI MF also had schemes with exposure to RBBNH. However, these didn’t see any major impact on its NAVs. The fund house had 14 schemes exposed to the entity, the aggregate being Rs 380 crore, as of August-end. Of these, 11 schemes were FMPs.

According to sources, this could be because fund houses might have taken slightly different approaches as the exposure is backed by shares of Reliance Nippon Life AMC, which the promoters are looking to monetise.