The spotlight is well and truly on housing loan firm Dewan Housing Finance Corp. (DHFL). With Cobrapost, well-known for its investigative journalism exploits, alleging a Rs 31,000-crore financial scam at DHFL, investors are increasingly turning cautious. Some high-net worth families with debt mutual fund exposure have already been advised to cut exposure to schemes with DHFL holdings by experts. That’s right: DHFL’s debt is the real problem compared to its equity, which is extremely under-owned by mutual funds.
A RupeeIQ analysis of open-ended schemes showed that there are 122 schemes across 25 fund-houses that have taken exposure to debt securities floated by DHFL group entities. Put together, these fund-houses have bought DHFL group debt instruments worth nearly Rs 7,800 crore. But, that is not the worrying part. The real worry is how certain schemes have excessive exposure to DHFL debt. Even, for some fund-houses, DHFL group exposure is above 10% of their concerned schemes. If the worst fears about DHFL come true like IL&FS, investors in some of these funds could end up losing quite a chunk of money. Our goal is not to scare you but present facts so that you can take an informed decision.
Most exposed to DHFL group
The jury is still out on the state of DHFL group financial status in terms of loans. The management, after the so-called Cobrapost expose, has clarified how it is on planning to raise money by selling project finance loans and non-core assets. As a debt fund investor, you should look at how exposed the fund-house and the scheme is to DHFL group entities. If a repeat of IL&FS situation happens, the debt securities of all entities of a group are impacted.
We tried to look at how open-ended debt mutual funds are exposed to Dewan Housing Finance Corp. and its group units like Aadhar Housing Finance, Avanse Financial Services, Essential Hospitality, and Wadhawan Global Capital. The total amount of debt exposure of Rs 7,793 crore is distributed in the following manner across DHFL group entities. As you can see, 80% of the exposure is in Dewan Housing Finance Corp. (DHFL) alone, which has a rating of Crisil A1+ for short term instruments. About 11% is in Wadhawan Global Capital, the holding company of DHFL. About 3-4% each is in Aadhar Housing Finance (short term debt is rated Crisil A1+) and Avanse Financial Services (short term debt is rated Crisil A1+). Just 1% of total group exposure is in Essential Hospitality.
|DHFL entity wise MF exposure|
|DHFL group entity name||Value of debt holdings in MF portfolios (Rs Cr)|
|AADHAR Housing Finance Ltd.||278|
|Avanse Financial Services Ltd. –||323|
|Dewan Housing Finance Corpn. Ltd.||6259|
|Essential Hospitality Pvt Ltd.||92|
|Wadhawan Global Capital Pvt Ltd.||842|
The above data tells us that investors should be bothered more about Dewan Housing debt, rather than other units. This is also because most of the group unit ratings are highly dependent on Dewan Housing. If that rating changes, others will change automatically.
How are fund-houses placed with DHFL group exposure
We have looked at how much debt of DHFL group entities is with mutual funds. It is quite relevant to see how much DHFL group debt exposure is with individual AMCs or fund-houses.
Do remember the larger a fund-house, the higher the chances of it having a higher absolute exposure. For instance, a Rs 5,000 crore fund-house can have Rs 500 crore exposure, while a Rs 1 lakh crore fund-house can have Rs 4,000 crore. This is why we feel that it is more important to look at how much of AMC’s schemes assets (in percentage terms) are invested in DHFL group debt.
At an industry level, the Rs 7,793 crore of DHFL group debt exposure accounts for just 3% of the Rs 2.58 lakh crore in the 122 open-ended schemes at 25 fund-houses. But, at an individual AMC level, the numbers are higher for some.
For instance, total DHFL group debt exposure to BOI AXA, and DHFL Pramerica is 12% of the total assets of the respective schemes. Another 10 AMC schemes have between 5-9%.
Interestingly, certain fund-houses like HDFC, Quantum, SBI, Canara Robeco, IDFC, Essel, Mahindra, IIFL, Motilal, PPFAS and Taurus do not seem to have any debt exposure to DHFL group entities (as on Dec. 2018 data).
Aditya Birla Sun Life, JM and ICICI Prudential fund-houses have less than 2% exposure.
Look at the chart below to know.
AMC -wise exposure to DHFL debt papers
|Fund-house||DHFL group exposure (Rs Cr)||No. of funds having exposure||Funds assets (Rs Cr)||DHFL group exposure as % funds assets|
|Aditya Birla Sun Life||283||4||29456||1|
Scheme specific exposure to DHFL entities
There are some MF schemes with very high exposure to at least one debt security of a DHFL group entity. These funds could face the brunt if those debt securities are affected by a rating action or some other negative development.
We do not know what will happen in the future given the fast-paced dynamics. However, if a debt scheme has more than 15% invested in just one debt security (not the company, or group), it does scare us.
Here is a list of funds with corresponding debt security that is more than 10% of respective net assets.
|Fund name||Debt instrument with yield% and maturity date||% of net asset of fund invested in the debt instrument||Market value of debt instrument held (Rs Cr)|
|DHFL Pramerica Ultra Short Term||Dewan Housing Finance Corpn. Ltd. TR-1(30-Apr-19)||33.78||123.76|
|JM Income||Dewan Housing Finance Corporation Ltd. SR-I CATG III & IV 09.10% (09-Sep-19)||21.79||2.97|
|JM Short Term Fund||Dewan Housing Finance Corporation Ltd. SR-I CATG III & IV 09.10% (09-Sep-19)||21.30||3.46|
|Indiabulls Savings Income||Avanse Financial Services Ltd. -SR-4 TRAN 1 8.65% (02-Nov-20)||19.27||5.77|
|JM Low Duration||Dewan Housing Finance Corporation Ltd. SR-I CATG III & IV 09.10% (09-Sep-19)||17.96||28.18|
|Baroda Dynamic Bond||Dewan Housing Finance Corporation Ltd. SR-III CATG III & IV 09.25% (09-Sep-23)||17.22||1.87|
|DHFL Pramerica Medium Term||Dewan Housing Finance Corporation Ltd. SR-II CATG III & IV 9.15% (09-Sep-21)||14.04||9.57|
|DHFL Pramerica Floating Rate||Dewan Housing Finance Corporation Ltd. SR-I CATG I & II 09.05% (23-Sep-19)||12.51||12.09|
|DHFL Pramerica Low Duration||Dewan Housing Finance Corporation Ltd. SR-I CATG I & II 09.05% (23-Sep-19)||12.32||56.47|
|BNP Paribas Medium Term||Dewan Housing Finance Corporation Ltd. SR-I CAT I-IV 08.90% (04-Jun-21)||12.25||21.98|
|BOI AXA Short Term Income||Dewan Housing Finance Corporation Ltd. CATG I & II SR-IV 9.1% (16-Aug-19)||11.58||19.30|
|DHFL Pramerica Short Maturity||Dewan Housing Finance Corporation Ltd. CATG I & II SR-IV 9.1% (16-Aug-19)||11.05||73.89|
|Tata Medium Term||Dewan Housing Finance Corporation Ltd. SR-I CAT I-IV 08.90% (04-Jun-21)||10.19||9.56|
|Indiabulls Short Term||Avanse Financial Services Ltd. -SR-4 TRAN 1 8.65% (02-Nov-20)||10.05||17.68|
Disclaimer – Please note that investors are requested to consult their financial, tax and other advisors before taking any investment decision.