Taurus Debt Funds Weighed Down By Ballarpur Downgrade To Default StatusĀ
Four debt funds of Taurus Mutual Fund marked down their net asset values (NAV) by 7-12 percent each after India Ratings and Research (Ind-Ra) downgraded Ballarpur Industries Ltd. (BILT) to default status.
The long-term issuer rating of Ballarpur was downgraded to āIND D' on February 22, according to a statement issued by the rating agency. It attributed the downgrade to the company's inability to service debt.
The downgrade reflects delays in debt servicing by the company. BILT continues to face delays in the necessary deleveraging, as efforts to monetise its assets have not fructified within planned timelines. The company has also been unable to refinance its debt or elongate the maturity profile of its near-term debt obligations fully.India Ratings Statement
Taurus Mutual Fund, which had exposure to BILT and Bilt Graphics Paper Products Ltd. via certificates of deposits, had to take a 25 percent markdown in assets after the downgrade.
According to regulations issued by the Securities and Exchange Board of India (SEBI), mutual funds are required to mark down their asset value by 25 percent if the rating of the issuer falls below āBBB minus' ā the investment grade.
Taurus Mutual Fund had a total exposure of Rs 106 crore to Ballarpur debt at the end of January 31, 2017, according to data available on the fund's website. The debt schemes of the mutual fund are managed by Archit Shah.
Shah and Waqar Naqvi, chief executive officer of Taurus Mutual Fund, were not reachable over the phone despite repeated attempts.
This is not the first such incident to occur in the mutual fund industry. In August 2015, JPMorgan Asset Management Company Ltd. had faced a redemption crisis after two of its funds, JPMorgan India Treasury Fund and JPMorgan India Short Term Income Fund, faced markdowns. The two funds had invested in the debt instruments issued by Amtek Auto.
CARE Ratings suspended the ratings of Amtek Auto after the company failed to share financial information with the agency. This forced JPMorgan to mark down its net asset value and put in withdrawal restrictions.
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