“Given the above uncertainties and to protect the interest of the unitholders, UTI AMC has decided to value the non-convertible debentures (NCDs) of Vodafone Idea at the lower of the two prices provided by the valuation agencies with effect from January 17, 2020,” said the company in a note.
The noted said that UTI AMC would review the valuations based on future developments and keep the investors informed.
The two close-end fixed maturity plans (FMPs) of UTI MF – Series XXX-IX (1266 days) and Series XXVII-II (1161 days) – also saw 3.08 per cent and 1.7 per cent impact, respectively, on NAVs. Overall, UTI MF had Rs 557 crore of exposure to debt papers of VIL.
The other schemes that felt the pinch on Friday, belonged to Nippon India MF and Birla Sun Life MF. Nippon India Hybrid Fund – which had 7.42 per cent of scheme exposure to VIL’s debt paper – saw its NAV dip by 3.83 per cent. The NAVs of the 13 FMPs of Nippon India MF (which had a combined exposure of Rs 64.37 crore) saw an MTM impact of two-four per cent. Overall, Nippon India MF had debt exposure of Rs 243 crore to VIL.
Aditya Birla MF – which had Rs 514 crore of debt exposure to VIL – didn’t see any major impact in four of its schemes that hold VIL debt exposure. The MTM impact ranged from one per cent to below one per cent.
Experts say the impact on the schemes’ NAVs may vary in coming days, depending upon how fund houses treat the developments on VIL and whether there are any further rating downgrades or credit events.
“The MTM impact has come after the valuations provided by the rating agencies. However, some may decide to value it in conservative terms and some fund house may take a different approach,” said a fund manager, requesting anonymity.
Franklin Templeton MF decided to markdown its debt exposure to VIL to zero on Thursday itself, the day Supreme Court (SC) rejected the review plea of VIL on AGR dues amounting to Rs 55,038 crore. This was done to prevent savvy investors getting advantage over other investors, by redeeming immediately post-SC ruling. Also, fresh inflows were subject to certain restrictions to prevent new investors from seeking arbitrage play on any MTM reversal.
Franklin Templeton MF had Rs 2,074 crore of debt exposure to VIL as of December 31, 2019, in six of its schemes. The markdown had led to 4-6 per cent dip in these on Thursday.
If VIL’s loan facilities are downgraded below the current rating of BBB-, that would make it below investment grade. This move would require all fund houses to mark down their debt exposure to VIL, in accordance with the mark down -levels stipulated by the Securities and Exchange Board of India for every rating action below the investment grade.
Care Ratings last November downgraded the long-term bank facilities and NCDs of VIL to BBB- from A- after SC ruled in favour of the government that was seeking Rs 1.47 trillion of statutory dues from telecom players.