Mutual fund schemes can now invest in unlisted non-convertible debentures (NCDs), SEBI has proposed in its annual board meeting today. The market regulator’s proposal is slightly different from what it had proposed nearly two months back.
Earlier in June, SEBI had proposed that all mutual fund schemes should invest only in listed NCDs.
With the new proposal, a mutual fund scheme can invest up to 10% of its debt portfolio in unlisted NCDs. SEBI said that such NCDs should offer monthly coupons and have to be rated by agencies. Further, fund houses could implement this in a phased manner latest by June 2020.
Joydeep Sen, debt expert and founder of Wiseinvestor.in said that since most bonds pay coupons annually, SEBI’s objective is to ensure that the company issuing such NCDs have enough cash flows. He believes that such a requirement ensures safety.
Dwijendra Srivastava, CIO – Debt, Sundaram Mutual Fund believes that the move would provide flexibility to fund managers. However, it is difficult to predict if fund houses are interested in unlisted NCDs.
Another proposal related to mutual fund is allowing Indian fund houses to launch offshore funds that could invest in India once they obtain FPI registration.
