YES Bank deal – negative for mutual funds

Mutual Fund investment through equity, debt, perpetual bond issue is at risk. In fact, few fund houses have already written down their investment vale.

As per the unconfirmed media report Nippon India Mutual Fund, erstwhile Reliance Capitals asset management arm, has marked down the value of Yes Bank exposure to Zero.

It also restricted subscription limit to Rs 2,00,000 per investor in the schemes having exposure to Yes Bank bonds.

Leading mutual funds holding YES Bank perpetual bonds are Franklin short term income (Rs 281.1 crore), Franklin Credit risk (Rs 135.2 crore), Franklin Dynamic accrual (Rs 54.4 crore), Nippon credit risk (Rs 540.1 crore), Nippon Strategic debt (Rs 436.3 crore),Nippon hybrid bond fund (Rs 102.7 crore), UTI hybrid (Rs 22.5 crore), UTI Medium term (Rs 7.4 crore), UTI credit risk (Rs 71.3 crore), Kotak credit risk (Rs 63 crore) and Kotak medium term (Rs 30.8 crore).

Around 32 debt mutual fund schemes held now downgraded debt papers of Yes Bank worth around Rs 3,632 crore, their portfolios in March revealed.

The rating agency ICRA downgraded the ratings on long term bonds of Yes Bank with a negative outlook on May 03.

ICRA, in a release, stated that “with a sizeable increase in the share of BB and below rated advances and the weakened capital cushions, the outlook on the ratings remains Negative.”

ICRA had earlier downgraded the long-term ratings of YES Bank on November 28, 2018, and kept them on ‘watch’ with Negative Implications.

ICRA has further stated that the bank’s ability to resolve these advances in a timely manner will remain a key driver of its asset quality, profitability and capital position. “YBL’s ability to reduce BB and below rated advances and improve the CET-I capital cushion and diversify the advances and liabilities will result in a change in the outlook to Stable from Negative.

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