UTI MF takes 25% haircut on exposure to IL&FS' special purpose vehicle

UTI Mutual Fund (MF) on Tuesday took an additional 25 per cent markdown on its exposures to Infrastructure Leasing & Financial Services’ (IL&FS) special purpose vehicle — the Jorabat Shillong Expressway (JSEL) — writing down half of these exposures till date.

“The fall in net asset value of some of our schemes on Tuesday was on account of the additional 25 per cent haircut on the non-convertible debentures (NCDs) of JSEL, currently rated ‘D’, which is in line with the Association of Mutual Funds in India (Amfi) ciruclar dated April 30, 2019, on standard haircuts for sub-investment grade securities,” said a UTI MF spokesperson in an e-mailed response. 

On Tuesday, five of UTI MF’s debt schemes (including two fixed maturity plans or FMPs) with sizeable exposure to JSEL, saw 2-6 per cent fall on their NAV. These schemes had between 5 and 16 per cent of assets exposed to the SPV. 

In terms of percentage of scheme assets, the largest exposure was in the UTI Banking & PSU Debt Fund (16.4 per cent of assets). This was followed by UTI Dynamic Bond Fund (8.2 per cent) and UTI Bond Fund (7.92 per cent). 

Among FMPs, UTI FTP-Series XXIX-II-1118 days had 6 per cent of assets exposed to the SPV. Other FMPs exposed to the IL&FS SPV were UTI FTP-Series XXVIII-X-1153 days (5.3 per cent of assets), and UTI FTP Series XXVIII-XIII-1134 days (3.1 per cent of assets).

There were five other schemes with exposure to the SPV, but these were lower in terms of percentage of assets.

The recent 25 per cent haircut follows another haircut of the same quantum by the fund house in January. The total markdown on these exposures now stands at 50 per cent. The fund house reiterated the SPVs’ ability to repay its dues. 

“UTI is a senior secured lender to JSEL, an SPV sponsored by IL&FS Transportation Networks and backed by annuities from the National Highway Authority of India. The current cash and bank balances of JSEL (lien marked to the debenture trustee) are more than sufficient to service liabilities of all senior secured lenders,” said the UTI MF spokesperson.  

“As JSEL is part of the IL&FS group, it is currently under the National Company Law Appellate Tribunal (NCLAT), and hence payments towards senior secured lenders will begin only after the final order from NCLAT,” the spokesperson added. 

On Thursday, the NCLAT allowed banks to declare IL&FS exposures as non-performing assets, but continued with the moratorium on IL&FS-related recovery. 

Overall, fund houses’ exposure to the IL&FS group stands at Rs 1,473 crore. Of this, Aditya Birla Sun Life MF’s exposure to the group entities alone stood at Rs 879 crore as on March 31, 2019, showed Morningstar data. This was followed by UTI MF’s Rs 431 crore exposure and HDFC MF’s Rs 162 crore exposure.