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    Altico default will hit debt mutual funds

    Synopsis

    Schemes with securities of troubled NBFC have to mark down value of holdings.

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    Reliance AMC and UTI AMC collectively hold `538 crore worth of Altico Capital debt across 15 schemes.
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    Another round of bad news is likely to hit debt funds as Altico Capital, a non-banking finance company, has defaulted on interest payments to a Dubai-based bank.

    On 3 September, India Ratings and Research downgraded Altico’s long-term issuer rating from AA- to A+ with negative outlook. The rating agency again downgraded the issuer to B, or ‘below investment grade’. Post this action, debt schemes holding securities of the troubled NBFC will have to mark down the value of their holdings by up to 75%. The NAVs of the schemes are likely to fall accordingly. UTI AMC has proposed to create segregated portfolio in UTI Credit Risk Fund, subject to approval from its Board of Trustees. This means the scheme’s holding in Altico will be carved out into a separate fund, with existing investors allotted equal number of units in the segregated portfolio as held in the main portfolio. This ‘sidepocketing’ is permitted by Sebi.


    Data from Rupeevest shows that Reliance AMC and UTI AMC collectively hold Rs 538 crore worth of Altico Capital debt across 15 schemes. UTI Credit Risk Fund has the highest exposure to the entity totalling Rs 200 crore—translating into 5.7% of its corpus. Reliance Ultra Short Duration Fund has exposure of Rs 150 crore to Altico, comprising 4.6% of its assets.

    15 schemes hold Altico debt worth Rs 538 cr
    UTI Credit Risk Fund has the highest exposure to the entity totalling Rs 200 crore.
    altico
    Data as on 31 August

    Altico Capital, a lender to real estate firms, has reportedly borrowed Rs 4,361.55 crore from banks and financial institutions. Earlier, the company’s chairperson Naina Lal Kidwai, former head of HSBC India, stepped down from Altico citing personal reasons. A few months ago, auditing firm PwC had also resigned from Altico.

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    5 Comments on this Story

    RR333 days ago
    Really difficult to trust UTI mutual fund, Tata Mutual fund etc. They are not taking seriously the hard earned money of the investors. The only reason for investment by investors is to earn few basis points more than the FD rate of interest. It does not mean that MF should risk their capital. Will they be careful in future, otherwise they lose the business.
    Guy Bengali335 days ago
    Again a perfect case, unable to handle trouble people holding responsible position resigns. Lenders will proportionately reduce the return to investor. All these people had made good bucks and people who invested will have bear the pain. It seems India is a very favorable country where one can do business by taking debt/loan if you can''t return it is investor (common people) suffer.
    Kochar Bipin335 days ago
    Realty sector is the largest employer in India - it is hence extremely concerning that this sector is being deprived of funding by banks, mutual funds and now even real estate focused firms.
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