BOI AXA MF has taken a haircut in its credit risk fund against the scheme’s entire exposure to IL&FS, effective October 5. The BOI AXA Credit Risk Fund has exposure to commercial papers of IL&FS which are maturing on October 29. In a note to distributors, the fund house said that the write-off was being taken as the revival plan for IL&FS was unlikely to be announced before the maturity date.
“With the government intervention, we expect to recover our investment in IL&FS Ltd in due course. However, given that the maturity of our holding in IL&FS CP is on October 29, 2018 and that the roadmap for revival is to be announced post maturity of our holding, there is strong likelihood that we may not receive our outstanding on the due date,” the fund house said in its note.
The net asset value (NAV) of the credit risk fund took a hit of 5.17 per cent on Friday (October 5) triggered by the haircut.
Data from Value Research shows that the credit risk fund’s exposure to the IL&FS CP accounted for 6.13 per cent of scheme’s assets, with a value of Rs 1.03 billion as of August 2018. The recent note by the fund house stated that the scheme's exposure to IL&FS securities was 5.4 per cent of the scheme's NAV.
In its note, the fund house also cited IL&FS’ new board’s media address after taking stock of the situation. “The newly appointed board met on October 4, 2018 and said that IL&FS case is far more complex and is expected to take longer time than expected. Aim of the board is to ensure fair value and resolution of the enterprise having regard to all its complexities. The immediate responsibility of the board is to prepare a roadmap for its revival by October 31, 2018, as directed by the NCLT,” the note said.
The government-appointed board was made aware that as many as 348 entities were part of the IL&FS group.