BOI AXA Mutual Fund (MF) -- a joint venture between Bank of India and the France-based AXA Investment Managers -- has had to take a mark-to-market hit in its credit risk fund following downgrade of the auto ancillary company Sintex-BAPL, which accounted for over 20 per cent of the scheme's assets.
The scheme's net asset value dipped six per cent on Monday after CARE Ratings downgraded the debt papers from BBB-plus to BB-plus, which is below the investment grade.
"Valuation agencies in line with the circular of Securities and Exchange Board of India (Sebi) have stated that the below-investment-grade downgrade of such a paper should trigger a 15 per cent initial discount before agencies give out valuations," said Alok Singh, chief investment officer of BOI AXA MF
Further, the scheme's exposure to the company is in excess of the 12 per cent limit laid down by Sebi for a single issuer. At the end of April, the fund's exposure to the company stood at 22.5 per cent, which amounted to Rs 159 crore.
"The fund has been seeing fall in its overall assets. This has led to passive breaches of Sebi's exposure limits. We are working on correcting these," Singh added. According to people in the know, Sebi has been apprised of the situation.
The other exposure where the scheme holds more than 12 per cent of its assets is Karuna Healthcare.
Last week on Friday, CARE Ratings downgraded various loan facilities of Sintex-BAPL citing lack of co-operation from the company in sharing the data required to keep track of the firm's credit quality.
According to the factsheet for April, DSP MF is another fund house with exposure to Sintex-BAPL in its credit risk fund. The fund's exposure to the company is 2.48 per cent of its assets. This amounted to Rs 105 crore of exposure as of April 30.
The exposures of the two fund houses could have changed in May.