MFs Re­tain Ex­po­sure to NBFC Debt De­spite Tur­moil, but Move to Less-risky Play­ers

The Economic Times - - Disruption: Startups & Tech - Ashutosh.Shyam @times­

ET In­tel­li­gence Group: The spec­tre of as­set-li­a­bil­ity mis­match in sev­eral non-bank­ing finance com­pa­nies (NBFC) three months ago has prompted mu­tual funds (MFs) to re­align their debt ex­po­sure by giv­ing pref­er­ence to less risky lenders. Con­trary to the gen­eral per­cep­tion, they have not cut ex­po­sure to the sec­tor.

The to­tal MF ex­po­sure to debt in­stru­ments with ma­tu­rity of un­der three months was more or less sta­ble at .₹ 1.9 lakh crore in the De­cem­ber 2018 quar­ter com­pared with the pre­vi­ous quar­ter, ac­cord­ing to Credit Suisse. It sug­gests that most of the short-term debt is­sued by NBFCs has been rolled over.

MFs in­creased ex­po­sure to NBFCs such as Bajaj Finance, Cap­i­tal First, L&T Finance Hold­ings, PNB Hous­ing Finance, Mahin­dra & Mahin­dra Fi­nan­cial Ser­vices and Hero FinCorp in the range of 5-75% in the past three months. They re­duced ex­po­sure to DHFL, In­di­a­b­ulls Group, IIFL, Edel­weiss Fi­nan­cial Ser­vices, and JM Fi­nan­cial by 7-11% of the to­tal debt ex­po­sure since Septem­ber 2018. This would ne­ces­si­tate the lat­ter group to raise funds at a higher cost by is­su­ing long-term debt in­stru­ments.

On the other hand, qual­ity NBFCs ben­e­fited from tap­ping the MF route to move fur­ther into the short-end of bor­row­ings. Sebi has stip­u­lated a limit of 40% to a sec­tor for the debt mu­tual funds. It was 33% at the end of De­cem­ber 2018, ac­cord­ing to Credit Suisse.

The share of liq­uid and money mar­ket funds in the to­tal fixed in­come in­creased by 380 ba­sis points to 39.1% in De­cem­ber 2018, ac­cord­ing to AMFI. As a re­sult, the to­tal fixed in­come as­sets un­der man­age­ment grew 2% in the past three months to .₹ 11.4 lakh crore.

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