NAVs of fixed in­come schemes fell 7-12% on Wed­nes­day as the fund house wrote down its en­tire in­vest­ment in Bal­larpur

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Mum­bai: In­vestors in debt schemes of Taurus Mu­tual Fund losti­none­day­whatthey­hadgained in a full year. Net as­set value of Tau­rusMu­tu­alFund’sfixed­in­come schemes fell 7-12% on Wed­nes­day af­ter In­dia Rat­ings and Re­search (Ind-Ra) down­graded its credit rat­ings on Bal­larpur In­dus­tries (BILT), In­dia’s largest maker of pa­per prod­ucts, to the low­est grade.

Th­is­forcedthe­fund­house­towrite down the en­tire in­vest­ment in Bal­larpur and stop fresh in­flows into the af­fected schemes.

Taurus holds ₹ 58.05 crore worth of Bal­larpur In­dus­tries’ in­stru­ment s a c r o s s four funds. Ac­cord­ing to Value Re­search data, Taurus Short Term In­come Fund, Taurus Ul­tra Short Term Bond Fund, Taurus Dy­namic In­come Fund and Taurus Liq­uid Fund had ex­po­sure­sof 11.96%,11.94%,7.47% and 4.3%, re­spec­tively, to BILT’s com­mer­cial pa­per. Ind-Ra down­graded Bal­larpur In­dus­tries’ (BILT) Long-Term Is­suer Rat­ing to ‘IND D from ‘IND BBB-’. BILT’s term loans, fund­basedand­non-fund-based­work­ing cap­i­tal lim­its, non-con­vert­ible deben­ture (NCDs) and com­mer­cial pa­per in­stru­ments have all been down­graded.

In the last cou­ple of years, the mu-

tu­al­fundin­dus­try­sawt­woin­stances of debt schemes’ NAVs fall­ing sharply in a day fol­low­ing credit rat­ing down­grades. NAVs of se­lect d e b t s chemes o f Franklin Tem­ple­ton and ICICI Pru MF had dropped by as much as 1.5% in a day in Fe­bru­ary 2016 af­ter Crisil first cut its rat­ings on JSPL se­cu­ri­ties to junk cat­e­gory be­fore fur­ther down­grad­ing it to de­fault. In 2015, in­vestors in two debt schemes of JPMor­ganAs­setMan­age­men­thad borne the brunt of credit rat­ing down­grades of trou­bled auto com­po­nent maker Amtek Auto’s debt in­stru­ments.

In­vestors in Taurus can re­deem their in­vest­ments from these schemes, the fund said. In a no­tice cum ad­den­dum, on its web­site, the fund house said, “With ef­fect from Fe­bru­ary 23, we have de­cided to tem­po­rar­ily sus­pend sub­scrip­tion on ac­count of cer­tain un­avoid­able cir­cum­stances, in Taurus Liq­uid Fund, Ul­tra Short Term Bond Fund, Short Term In­come Fund and Dy­namic In­come Fund”. An emailsent­tothe­fund­house­did­not elicit any re­sponse.

As Taurus has writ­ten off these in­vest­ments, unithold­ers would ben­e­fit if Bal­larpur pays back. But, an­a­lysts said in­vestors should cut their losses and move on.

“Hold­ing low-grade short-term com­mer­cial­pa­peri­naliq­uid­fundis acause­for­con­cern.In­vestor­swould do well to move out of the schemes de­spite the loss,” says VIdya Bala, head of re­search, Fundsin­dia.com.

Three other mu­tual funds houses held Bal­larpur In­dus­tries’ debt in­stru­ments in their fixed in­come port­fo­lios till late 2016 or early 2017. These fund houses, how­ever, man­aged to exit the Bal­larpur pa­per be­fore the down­grade though the in­dus­try is abuzz with spec­u­la­tion that two of them have sold the debt in­stru­ments to their par­ents. This could, how­ever, not be con­firmed.

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