Worries pile up for debt mutual funds as multiple downgrades hit NAVs

Debt funds are being hit by a double whammy.

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Debt funds are being hit by a double whammy. With credit rating downgrades for several companies piling up one after the other, exposure to troubled entities seems to be adding up for a few of these funds. The exposure as a percentage of the overall fund portfolio is also slowly inching up as the fund corpus itself bleeds owing to high redemptions by investors. For instance, Baroda Treasury Advantage has holdings across DHFL, Essel and Yes Bank group entities with a combined exposure of 38.79% of its portfolio.

DHFL Pramerica Short Maturity has holdings in papers of ADAG, DHFL and Yes Bank group entities aggregating to 55% of the fund portfolio. Similarly, Aditya Birla Dynamic Bond and Aditya Birla SL Medium Term Plan have holdings in Essel and IL&FS entities totalling 16.7% and 22.01% of their corpus, respectively. While singular instances of rating downgrade in a debt fund do not impact the NAV much owing to diversified holdings, multiple downgrades have started to put pressure on fund NAVs.

  • -12.33%Annualized Return for 3 year
  • >3 years Suggested Investment Horizon
  • 9.0 YearsTime taken to double money
  • -16.36%Annualized Return for 1 year
  • 6 months – 1 year Suggested Investment Horizon
  • 0.9 YearsTime taken to double money
Debt mutual funds' combined exposure, across IL&FS, Essel, Ys, ADAG & DHFL

Scheme Number of troubled
houses in portfolio
Holding % Market value of holdings
(Rs crore)
Total corpus
(Rs crore)
DHFL Pramerica Short Maturity 3 54.99 165 300
Baroda Treasury Adv 3 38.79 210 542
Tata Corp Bond 2 28.21 52 184
Aditya Birla SL Medium Term 2 22.01 1,728 8,093
IDBI Credit Risk 2 19.35 18 94
Aditya Birla SL Dynamic Bond 2 16.67 677 4,059
Reliance Strategic Debt 3 16.25 909 5,593
DHFL Pramerica Credit Risk 3 12.85 102 796
Reliance Credit Risk 4 12.60 1,171 9,292
UTI Bond 2 12.13 82 674
ADAG figures only pertain to Reliance Commercial Finance & Reliance Home Finance.
Source: Ace MF; Data compiled by ETIG Database
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