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Altico default will hit debt mutual funds

Another round of bad news is likely to hit debt funds as Altico Capital, a non-banking finance company, has defaulted on interest payments to a Dubai-based bank.

On 3 September, India Ratings and Research downgraded Altico’s long-term issuer rating from AA- to A+ with negative outlook. The rating agency again downgraded the issuer to B, or ‘below investment grade’. Post this action, debt schemes holding securities of the troubled NBFC will have to mark down the value of their holdings by up to 75%. The NAVs of the schemes are likely to fall accordingly. UTI AMC has proposed to create segregated portfolio in UTI Credit Risk Fund, subject to approval from its Board of Trustees. This means the scheme’s holding in Altico will be carved out into a separate fund, with existing investors allotted equal number of units in the segregated portfolio as held in the main portfolio. This ‘sidepocketing’ is permitted by Sebi.

Data from Rupeevest shows that Reliance AMC and UTI AMC collectively hold Rs 538 crore worth of Altico Capital debt across 15 schemes. UTI Credit Risk Fund has the highest exposure to the entity totalling Rs 200 crore—translating into 5.7% of its corpus. Reliance Ultra Short Duration Fund has exposure of Rs 150 crore to Altico, comprising 4.6% of its assets.

15 schemes hold Altico debt worth Rs 538 cr

UTI Credit Risk Fund has the highest exposure to the entity totalling Rs 200 crore.


Data as on 31 August

Altico Capital, a lender to real estate firms, has reportedly borrowed Rs 4,361.55 crore from banks and financial institutions. Earlier, the company’s chairperson Naina Lal Kidwai, former head of HSBC India, stepped down from Altico citing personal reasons. A few months ago, auditing firm PwC had also resigned from Altico.


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