Jindal Steel & Power (JSPL) on Monday honoured its repayment commitment to asset management companies ICICI Prudential and Reliance. The debt-laden steelmaker paid Rs 235 crore to ICICI Prudential AMC and Rs 50 crore to Reliance Mutual Fund (MF).

Rating agency CRISIL had in February downgraded the company’s papers to ‘D’, default grade. Another fund house, Franklin Templeton Investments, had offloaded its entire holdings of JSPL paper at a loss last month.

Sundeep Sikka, chief executive officer of Reliance MF said: “We have received the sum (due) and this will positively reflect in the net asset value (NAV) of the scheme having exposure to the company’s instrument.”

Franklin Templeton had a more sizable exposure to JSPL’s papers than ICICI Prudential or Reliance MF

Given the rising concerns over credit risks, fund houses said they'd remain cautious while taking exposure to papers of companies with high debt and poor ratings.

“At ICICI Prudential, we have been taking very measured exposures at both scheme and AMC level, to ensure a better investor experience. We have put in strong systems and processes for managing credit, concentration and liquidity risks,” added ICICI Prudential.

According to Sikka, “Reliance Mutual Fund has in place a strong research team which analyses the credit side of companies, irrespective of the yields.”

MF exposure to below investment grade debt papers had come under a spotlight after a default by Amtek Auto last year. JPMorgan, which recently exited its domestic fund management business, had exposure worth nearly Rs 200 crore to the Amtek papers.

 

Source : business-standard.com

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