UTIMF writes off DHFL holdings in five funds

MUMBAI:

UTI Mutual Fund

, the oldest fund house in India, on Friday said it has written off an additional 25% of its Rs 1,253-crore holding of debt papers of troubled mortgage lender

Dewan Housing Finance

(

DHFL

), taking the total write off to 100% after the crisis-hit firm defaulted on repayments.


This means investors in five of

UTIMF

’s schemes —

UTI Treasury Advantage Fund

,

UTI Ultra Short Term Fund

,

UTI Short Term Income Fund

,

UTI Dynamic Bond Fund

and

UTI Bond Fund

— will see a further decline in net asset values (NAVs).

On June 4, the fund house had written off 75% of its DHFL holding after the company failed to pay its bond holders. The company was subsequently downgraded to default category by three ratings agencies. According to industry data of that day, almost overnight, the NAV of UTI Short Term Income Fund had fallen by 9.4% and the NAV of

UTI Treasury Advantage Fund by 8.8%, while NAVs of several of its fixed maturity plans (FMPs) had witnessed a fall of as much as 8.3%.

The largest hit, however, were NAVs of two DHFL Pramerica’s funds, which had seen NAVs crashing by around 50%. In case of debt funds, a loss of 6-7% could mean writing off interest income of a year or so.

The decision by UTIMF to write off DHFL exposure in its funds, also called ‘mark down’ in industry parlance, indicates that the troubles related to loosely funded NBFCs are mounting and their financial health is questionable, market players said.

Through a release, UTIMF said that the default by DHFL and the subsequent downgrading of its debt, the fund house “anticipates that there would be enhanced pressure and legal action on DHFL from all creditors, including exercise of early redemption clause and legal options by various lenders”. It added, “This is expected to further delay the recovery efforts of the company in disposal of its assets in an orderly manner.”