Many of you through various media sources must seen and heard about fall in NAV of debt schemes. There might be some doubts and queries regarding the same. In light of the same I would like to bring the below mentioned to your notice.

Dewan Housing Finance Corporation (DHFL) a non banking finance company has not able to pay its interest due on 4th of this month. And as per SEBI guidelines a single day delay of a single rupee is treated as default.

And as per the valuation committee for the secured bonds the mark down has to be done at 75%.

i.e, if 100 lent to a company and any delay of interest or principal by a day the value of the bond has to be written down by Rs 75. The sharp drop in NAV’s is because of it.

However DHFL mentioned it will honour the payments within the next seven days. Once its done there is a probability of recoup of NAV’s to certain extent. Need to see how things move in near future. It is one of the systemically important non banking finance company.

After the IL&FS issue liquidity has been tight particularly for NBFC’s. They already paid 40k crores debt in the last 5-6 months. And they are in the processing of selling its non core assets to reduce debt and looking to induct a strategic partner to tide over the situation. In another 2-3 months a clear picture will emerge.

We do not hold any fund which got impacted by 30-40%.For couple of you the impact is minimal. Two most impacted funds in my recommendation are:

There is a 9.4% NAV impact on UTI short term and around 5% in UTI dynamic bond fund. If you see it in overall portfolio context the impact is max at 1% in some cases and below that in majority of the cases.

As of now no action is required. Since last couple of months for some of you proactively doing changes wherever necessary. Will take necessary action based on future developments.

Do let me know in case of any further queries.