UTI Mutual Fund has written off DHFL debt securities to 100% in its schemes.
The fund house clarified that if there is any recovery in future, the proceeds will be written back to the schemes on actual receipt basis.
In a press release, the fund house said, “UTI MF 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. This is expected to further delay the recovery efforts of the company in disposal of its assets in an orderly manner. Furthermore, there is no secondary market for such securities in the current scenario. Considering the high level of uncertainty as to recovery timelines and value, UTI MF has increased the markdown to DHFL debt securities from 75% to 100% in the schemes which have an exposure to DHFL. If there is any recovery in future, the provision will be written back to the scheme(s) on actual receipt basis.”
Further, the fund house has introduced exit loads on five schemes to restrict fresh subscription. The fund house said, “In order to safeguard the interests of the existing investors in these funds, UTI MF has introduced an exit load in the UTI Treasury Advantage Fund, UTI Ultra Short Term Fund, UTI Short Term Income Fund, UTI Dynamic Bond Fund and UTI Bond Fund effective from June 7, 2019. The introduction of the exit load is on prospective basis (i.e. will be applicable only to investors who invest in these schemes from 7th June 2019 onwards and not on existing investors) and has been done to deter speculative action in the funds and to safeguard the interests of the existing investors.”
On June 4, 2019, DHFL had interest and principal payments due to the tune of Rs. 1,100 crore to the industry and the company failed to repay on the scheduled date. Subsequently, on June 5, 2019, CRISIL, ICRA and CARE downgraded its rating on the commercial paper (CP) / non - convertible debentures (NCDs) of DHFL to ‘D’, based on delay in debt servicing due to inadequate liquidity, modest capital position and modest earnings.
