Mumbai: BOI Axa Credit Risk Fund is the first mutual fund scheme to write off its entire outstanding exposure to IL&FS effective October 5, 2018. The scheme had a 6.13% holding in the commercial paper of IL&FS maturing October 29, with a value of Rs 105 crore in its portfolio.
BOI Axa Credit Risk Fund had taken a 25% haircut on its exposure to IL&FS on September 15 as IL&FS defaulted on payment to some banks, insurance companies and mutual funds.
Due to the full write off, the schemes net asset value (NAV) fell by 5.17% on Friday October 5. “Any redemptions, will impact existing investors, hence we thought it prudent to write off the entire amount,”says Sandeep Dasgupta, CEO, BOI Axa Mutual Fund.
The fund house has discontinued fresh Investment via any mode in BOI AXA Credit Risk Fund with effect from October 08, 2018 till October 31, 2018.
In a note to investors and distributors, the fund house said, “With the Government intervention we expect to recover our investment in IL&FS Ltd in due course. However, given that the maturity of our holding in IL&FS CP is on October 29, 2018 and that the roadmap for revival is to be announced post maturity of our holding, there is strong likelihood that we may not receive our outstanding on the due date,”.
Even though on October 1, the Central government intervened to supersede the IL&FS Boad. The government replaced the board of IL&FS with selected nominees in order to ensure IL&FS has enough liquidity to ensure no more defaults take place and the infrastructure projecst are implemented smoothly. The newly appointed board met on October 4 and said that IL&FS case is far more complex and is expected to take longer time than expected. The funds average AUM fell from Rs 1661 crore in August 2018 to Rs 1625 crore in September 2018. Financial planners suggest investors in the scheme could stay invested given that the write off has already happened. “The IL&FS paper is now fully provided for. Those who stay put will get some money back as and when there is some recovery,” says Kaustubh Belapurkar, Director (Fund Research), Morningstar India.
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