DSP Mutual Fund Scheme Writes Down Half Its Exposure To Coffee Day Group Paper

DSP Mutual Fund wrote down half the value of a scheme's investment in VG Siddhartha's firm as shares of Coffee Day Enterprises Ltd. tumbled after the founder went missing and was later found dead.

Recent developments contributed to significant diminution in the value of shares offered as a collateral against non-convertible debentures, according to a statement by the mutual fund. While Coffee Day Enterprises has sought two weeks to come back with a concrete plan, the fund house said it has taken a 50 percent haircut on DSP Credit Risk Fund's exposure to the debt of Coffee Day Natural Resources Ltd. The value now stands at Rs 69 crore.

The exposure is secured by a pledge on listed shares of Coffee Day Enterprises and a land parcel, it said.

DSP Mutual Fund has the largest exposure to Coffee Day Group and promoter debt, according to Morningstar. Prior to its write-down, debt mutual funds held group's debt worth more than Rs 193 crore, according to Morningstar.

Shares of Coffee Day Enterprises have tumbled more than 40 percent in the last two days after Siddhartha was first reported missing. His body was found on the banks of the Netravati river near Mangaluru, five kilometres from the bridge where his driver last saw him around 36 hours earlier.

“It's an event-based risk which no one can predict. The action from (DSP) fund house is more precautionary as per current situation,” Vijai Mantri, founder of JRL Capital said. “This may also avoid a run on the schemes.”

According to Morningstar data, here's the exposure of debt mutual funds to Coffee Day Group and promoter debt:

Alok Singh, chief investment officer at BOI AXA Investment Managers, said, “We are evaluating the security cover (Coffee Day Enterprises shares) and depending upon the deterioration, will take the appropriate call.”