Sebi examines cos, mutual funds amid debt turmoil fears

Various listed companies as well as mutual funds have come under the scanner of Sebi for failing to make adequate disclosures about their debt exposure to investors.
The possible window dressing of debt woes came to the notice of the capital market regulator after some companies did not make proper disclosures to stock exchanges even as their credit ratings were downgraded by some rating agencies.
The latest move comes close on the heels of Sebi probing certain fund houses for their excessive exposure to debt papers of auto component maker Amtek Auto, which is grappling with financial troubles. Besides, Amtek's listed subsidiary Castex Technologies too is under the lens amid share price rigging allegations.

Sources said Sebi is looking at various listed firms, mostly in the mid-cap segment, that are facing debt turmoil and not making proper disclosures as required under the regulations.
Many entities are believed to have kept investors in the dark about their financial woes despite some of their credit ratings getting downgraded, they added.
According to sources, some mutual fund houses are also being probed to ascertain whether they failed to furnish information to investors about their exposure to such debt crisis-hit companies.

In the wake of the financial trouble at Amtek Auto, Sebi has already widened its probe into alleged share price manipulation at its subsidiary Castex Technologies with role of banks, mutual funds and rating agencies also coming under the scanner.

While it has taken a serious note of the allegations, sources had said Sebi has expanded the probe into the matter suspecting that more players could be involved in efforts to manipulate the share price of Castex Technologies.
Besides promoters of the company, the market regulator is now looking at the possible role of banks, mutual funds and rating agencies in the whole issue, sources had said.
It was alleged by some bondholders that efforts were being made to rig the share price of Castex Technologies by forcibly asking investors to convert their bonds.
Exposure to Amtek Auto's debt papers have created ripple effects in the mutual funds and other market segments as well.

In August, Amtek Auto -- which is a promoter of Castex Technologies -- had said that "there is temporary cash flow mismatch in the company".
Recently, JP Morgan Mutual Fund restricted redemptions from two of its debt schemes -- Short Term Income Fund and India Treasury Fund.
The move came in the wake of a decline in NAVs (net assets value) of the schemes due to fund house's exposure to Amtek Auto's debt papers. These schemes have a collective exposure of about Rs 200 crore in Amtek Auto.