Nippon India MF — which has among the largest exposures to YES Bank’s AT-1 bonds — has marked it down to zero. At the end of January 31, the fund house had an aggregate exposure of Rs 1,770 crore to the bonds, according to Value Research.
After fully writing off the exposure, four schemes of Nippon India MF saw sharp dips in their NAVs. The NAV of Nippon India Strategic Debt Fund was down by 25.4 per cent (20 per cent of scheme assets exposed), while that of Nippon India Credit Risk Fund’s dropped 11.9 per cent.
The fund house has also decided to segregate or side-pocket the YES Bank
exposure in five of its schemes, after the bank was downgraded to ‘D’ or default grade on Friday.
Baroda MF has also decided to mark down debt exposure to zero and side-pocket the exposure. As on January 31, the MF had Rs 53 crore of debt exposure to YES Bank.
In the Baroda Treasury Advantage Fund, the exposure was 26.87 per cent of scheme assets as of January 31, 2020.
“The valuation adjustment reflects the realisable price of the security on the date of valuation. In the draft reconstruction plan ... the instruments qualifying as AT-1 Capital issued ... shall stand written down permanently in full, from the Appointed date (date to be specified by the Central Govt),” the MF said in its note.
UTI MF decided to create side-pocket for YES Bank
exposure, but refrained from taking full markdown at present juncture. Similarly, PGIM India Credit Risk Fund also created side-pocket for its exposure.
“Valuation agencies have already taken a markdown of 35 per cent. These bonds carry equity-like characteristics, and are unlikely to be treated on a par with other types of debt securities,” said a fund manager.
On Friday, Franklin Templeton MF took a 47.5-per-cent markdown on its exposure to AT-1 bonds of YES Bank. Other exposed schemes (with large-sized exposure) that saw a sharp hit in NAV are UTI Credit Risk Fund (Rs 45-crore exposure as of January 31) at 2.79 per cent; Franklin India Credit Risk Fund (exposure of Rs 135 crore) at 1.08 per cent; and Frankin India Short Term Income Fund (exposure of Rs 281 core), at 1.08 per cent.
ICRA downgraded all bonds of YES Bank to ‘D’ citing restriction on bank’s payments to creditors after being put under moratorium.