Reliance Mutual Fund and SBI Mutual Fund account for bulk of the exposure among six asset managers holding Rs 2,570 crore worth of debt of two Anil Ambani group-controlled non-bank lenders that were downgraded by rating agencies.
CARE Ratings last week cut Reliance Home Finance Ltd.'s long-term debt to “default”, citing delays in servicing bank debt. ICRA Ltd. downgraded Reliance Home Finance Ltd.'s Rs 1,200-crore commercial paper programme to A4 from A2.
Reliance Mutual Fund, in a media statement, said it has an exposure of Rs 535 crore and Rs 1,083 crore to the non-convertible debentures of Reliance Commercial Finance and Reliance Home Finance, respectively. About 10 percent of its 166 fixed income and hybrid schemes have an exposure to the two companies.
But the data from Morningstar suggests Reliance Mutual Fund's total exposure to the debt instruments—like commercial paper, debentures, non-convertible debentures— of the two companies stood at Rs 1,546 crore.
The six asset managers hold Rs 1,871.6 crore worth of Reliance Home Finance debt and Rs 698 crore worth of Reliance Commercial Finance paper, according to Morningstar.
Funds With Highest Exposure
Reliance Equity Hybrid Scheme has the highest exposure to the two companies—Rs 533 crore or 4.16 percent of total assets to Reliance Commercial Finance, and Rs 130 crore or 1 percent of the assets to Reliance Home Finance, according to Bloomberg and mutual fund data. SBI Dual Advantage Fund Series XXII and Series XXIII have an exposure of Rs 244 crore and 170 crore, respectively, to the two companies.
According to a Credit Suisse report, overall mutual fund exposure to the Anil Ambani group companies is worth Rs 5,000 crore. Of the total, Rs 200 crore is through fixed maturity plans.
Reason To Worry?
Mutual funds' investments in corporate debt have triggered concerns since September, first because of exposure to the IL&FS group, and later on account of investment in debt of Essel Group and Anil Ambani group companies.
The impact of the latest downgrades on Anil Ambani group companies will lead to a write-down of the net asset value of the schemes and that would reflect on the returns generated by the schemes in the short term, said Amol Joshi, Founder of PlanRupee Investment Services, who cautioned unit holders to exercise better due diligence. But he sees no compelling reason for a sudden exit, citing that even Dewan Housing Finance Ltd. was able to pay principal and interest on time.
Reliance Group's management has said that it will service all capital market and other loan obligations on time by fast-tracking securitisation and monetisation of assets.
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