Reliance Mutual Fund To Write Down Exposure To Reliance Home And Reliance Commercial

Reliance Mutual Fund will mark down the value of investments in Anil Ambani group’s Reliance Home Finance Ltd. and Reliance Commercial Finance Ltd. following rating downgrades of non-bank lenders.

The fund house has exposure of Rs 535 crore and Rs 1,083 crore to Reliance Commercial Finance and Reliance Home Finance, respectively, according to its media statement. About 10 percent of its 166 fixed income and hybrid schemes have an exposure to the two companies.

Till the maturity of the instruments, and in line with regulatory rules, these exposures will lead to a mark-to-market valuation impact in the net asset value of the schemes based independent valuations, the mutual fund said. The interest of the investors will be protected, it said, citing “adequate security”.

Defaults by AAA-rated Infrastructure Leasing & Financial Services Ltd. last September first triggered concerns about mutual funds’ investment in corporate debt. Standstill agreements over shares pledged by promoters of Zee Group and Anil Ambani-controlled companies amplified worries. While most non-bank lenders faced liquidity crunch as borrowing costs rose after IL&FS crisis, liquidity profile of Reliance Home Finance and Reliance Commercial Finance has been deteriorating.

Reliance Mutual Fund said the management of the two companies stated its intent to service all capital market and other long-term obligations by fast-tracking asset securitisation and monetisation.

The asset manager also disclosed an exposure of Rs 205 crore in secured long-term non-convertible debentures of Reliance Capital Ltd. But said there’s no impact on it since there has been no rating change.

On Friday, CARE Ratings cut Reliance Home Finance’s long-term rating to default, citing delayed bank repayments. There have been considerable delays in parent Reliance Capital’s plan to monetise its assets, leading to liquidity issues in Reliance Home Finance, it said. Reliance Home Finance, in a statement on Saturday, called it a delay.

ICRA also downgraded Reliance Home Finance’s Rs 1,200-crore commercial paper programme to A4 from A2. On April 23, Brickworks Ratings, CARE and ICRA had downgraded Reliance Home Finance and Reliance Capital citing liquidity concerns.