In line with the growing risk of default by various special purpose vehicles of IL&FS, rating agency ICRA has placed ratings of six mutual fund schemes, with aggregate assets under management of over Rs 18,000 crore, under watch with negative implications on account of their exposure to IL&FS and its group entities. The six schemes include two schemes of HDFC Mutual fund — HDFC short term debt fund and HDFC Banking (AUM of Rs 8,985 crore) and HDFC banking and PSU debt fund (Rs 2,803 crore); three schemes of UTI Mutual Fund — Banking and PSU debt fund (Rs 637 crore), Bond Fund (802 crore), Dynamic Bond fund (Rs 1,012 crore); and Aditya Birla Sunlife short term opportunities fund (Rs 3,925 crore). ICRA said that the rating actions are on account of “deterioration in the credit quality of the underlying investments of these schemes” driven by their exposure to SPVs IL&FS Limited. The six schemes have exposure to either of the three IL&FS SPVs — Hazaribagh Ranchi Expressway Limited (HREL), Jharkhand Road Projects Implementation Company Limited (JRPICL), Jorabat Shillong Expressway Limited (JSEL). “The default risks by various SPVs of IL&FS have increased given the recent communication by their management to trustees expressing to stop future repayments citing their interpretation of an order given by National Company Law Appellate Tribunal on October 15, 2018,” it said. It further pointed that two SPVs of IL&FS demanded a refund of the debt payment executed by them after October 15, 2018, from their trustees. “Despite a ring-fenced structure and adequate cash flows to service the debt obligations, these SPVs have asked the trustees to stop debiting the SPVs escrow account towards its future obligations,” ICRA pointed. According to ICRA as on December 31, 2018, the exposure of HDFC-STDF and HDFC-BPSU to HREL stood at 0.55 per cent and 0.29 per cent of the AUM respectively. For the three schemes of UTI — UTI Banking and PSU Debt Fund, UTI BF and UTI DBF — the exposure to JSEL stood at 6.87, 5.98 and 6.25 per cent of the AUM respectively as on December 31, 2018. Similarly, the exposure of Aditya Birla Sun Life Short Term Opportunities Fund to JRPICL stood at 1.15 per cent of AUM as on December 31, 2018. ICRA noted that in case of delays in honouring its obligations by these SPVs, their ratings are likely to be downgraded, impacting the credit scores of these MF schemes.
