BOI AXA Credit Risk—a debt mutual fund scheme—took a hit after its fund manager voluntarily marked down the value of its investments in securities of a subsidiary of Sintex Industries Ltd.
The net asset value of the credit risk fund—that invested in non-convertible debentures of Sintex-BAPL Ltd.—declined 18 percent in three days, according to Bloomberg data.
This comes after Sintex Industries defaulted on its repayment of Rs 89 crore worth of NCDs, an exchange filing said. That led to a 55 percent mark down of the mutual fund house's investments in Sintex BAPL. Meanwhile, Brickwork Ratings downgraded Sintex BAPL's instruments to ‘C', citing non-receipt of no dues statement from the company for May and deterioration in its standalone operating performance in the last financial year, according to a statement on the rating agency's website.
The senior secured debt of Sintex BAPL, which comprised 20 percent of the fund's value, stands at less than 10 percent after the write-down, said Alok Singh, chief investment officer (debt) at the fund house. Sintex BAPL, according to Singh, is a consumer sector-facing company with better business prospects but there could be contagion from its parent, Sintex Industries. “This contagion will lead to a reduction in secondary market liquidity of the bond for sure.”
The value of the fund's holdings in the securities, which stood at Rs 140 crore before the mark-down, is at a little over Rs 50 crore now, Singh said.
“The mark-down is part of the larger trend which we recently saw in case of Dewan Housing Finance Ltd. delaying interest payments,” said Anant Ladha, founder of Invest Aaj Kal. The next six months, according to the financial advisor, would be critical for corporates which are facing challenges to service debt.
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