MF industry has over Rs 2L cr stuck in risky debt

Around Rs 2 lakh crore of the mutual fund industry’s exposure is stuck in the risky corporate debt, according to the industry sources.

The mutual fund industry has exposure of Rs 4.34 lakh crore in the corporate debt paper – which includes floating rate bonds and non- convertible debentures, among others. “Around 50% of the corporate debt paper exposure is on the risky side,” a CEO of one of the mutual fund firms told DH.

The total exposure of the MF industry stood at Rs 23.79 lakh crore, of which 33% is in the corporate debt, 27% in commercial paper, bank certificates of deposit (15%), PSU bonds/debt (12%), G-Sec (4%).

Mutual fund industry witnessed a scare recently as two of HDFC Asset Management's fixed maturity plans (FMP) one of the Kotak Asset Management’s defered payment to its investors, owing to the exposure to the non-convertible debenture(NCDs).

In a turn, that could have made things worse for Kotak MF, the major exposure of Series 183 was to the army jawans, according to the sources in the know. “As a result of this, Nilesh Shah (company’s CIO) camped in the Pune to pacify the jawans,” the source said. The company, however, didn’t respond to the questionnaire sent by DH.

The industry sources told that it has been Sebi’s non-application of existing laws, that is making customers. “The laws are there. The question is what Sebi does. Or rather doesn’t do,” an industry source told DH.

When the collateral cover of Essel Group fell short, it wasn’t topped up. And second, when the debt repayment was pushed to September 30, it would make Subhash Chandra owned company a non-performing asset by the RBI norms. However, instead of the central bank, Securities Exchange Board of India (Sebi) is the regulator in this case – which has constantly declined to comment on the issue.