As per regulatory norms, fund house will have to give load-free exit window to investors; expets advise staying put in order to look for recovery Ja
As per regulatory norms, fund house will have to give load-free exit window to investors; expets advise staying put in order to look for recovery
Jash Kriplani | Mumbai
Last Updated at June 26, 2019 18:43 IST
Debt-riddled Dewan Housing Finance Corporation (DHFL) has got the Securities and Exchange Board of India’s (Sebi) nod to exit its mutual fund business by selling its 50 per cent stake to its joint-venture partner Prudential Financial.
“We are happy that we have received the final approval from Sebi. We will now need to complete a few more formalities including giving a load-free exit window to investors in-line with the Sebi requirement for change in control and other fundamental attribute changes,” said Ajit Menon, chief executive officer of DHFL Pramerica MF.
Sebi norms require a fund house to give exit option to unitholders without any exit load if there is any change in fundamental attributes of a scheme or trust or any other change affecting interests of the unitholders.
Experts say it would make sense for investors to stay put rather than opt to exit during the load-free window. “In schemes where the net asset value has got impacted, it would make sense for investors to stay put and look for recovery,” said Amol Joshi, founder of Plan Rupee Investment Services.
At the end of March quarter, the fund house’s average assets stood at Rs 7,627 crore. The deal is expected to be completed by July-end or early August.
“Post the changes we will be 100 per cent owned by Prudential Financial Inc US and a part of their global investment management business, PGIM. It is 10th largest asset manager with a 140-year legacy,” Menon added.
On Tuesday, DHFL was unable to make full payment on its maturing commercial papers. It made partial payment of Rs 150 crore on a proportionate basis, while assured that the balance Rs 225 crore will be paid to investors in next two days.
After falling as much as 9 per cent in early part of the trade, DHFL shares ended 6 per cent higher at Rs 80 on Wednesday.
The fund house had earlier decided to merge some of its schemes, which had seen sharp erosion in asset size following the IL&FS crisis. As a result of this erosion, these schemes were left with concentrated exposures to sponsor company DHFL’s illiquid debt papers.
The fund house decided to merge its Floating Rate Fund with Ultra Short Term Fund, and its Medium Term Fund with Credit Risk Fund.
The MF players with exposures to debt papers of DHFL had to take sharp markdowns on their exposures after rating agencies downgraded firm’s debt instruments to ‘default’ in early June. The rating action was triggered by the housing finance company’s payment delay, which it settled subsequently.
First Published: Wed, June 26 2019. 18:39 IST