DSP Mutual Fund has written off 50 per cent of their investments in NCDs issued by Coffee Day Natural Resources Private Limited (CDNRPL), a company owned by the deceased promoter of Coffee Day Enterprises Limited (CDEL).
VG Siddhartha, the promoter of CCD, went missing on Sunday. His body was found on Tuesday morning.
According to a communication sent by the fund house to its distributors, DSP Credit Risk Fund has an exposure to secured NCD issued by CDNRPL of face value of Rs 69 crores as on July 29, 2019. “The exposure is secured by a pledge of listed shares of Coffee Day Enterprises Limited (CDEL) and a land parcel,” the communique stated.
“Recent developments have contributed to significant diminution to the value of cover. CDEL has asked for two weeks to come back with a concrete plan regarding the exposure. Whilst we await the CDEL plan, erosion in value of cover merits to revisit the scheme’s exposure in the CDNRPL. Hence we have taken 50 per cent haircut on our exposure,” the fund house said.
The fund house also said that there will be a valuation impact of -1.30 per cent on the scheme.
“The scheme had around 4 per cent exposure to the NCDs of CDNRPL. They have written off 50 per cent. So the risk now is lower than before. However, there is no clarity on what happens to the remaining. We will have to wait and watch the situation of the company also,” says Vishal Dhawan, Founder, PlanAhead Wealth Advisors.
Dhawan also adds that these are the times when debt investors need to evaluate whether they are in the right kind of products or not. “This security might be saved by the fund house, but investors need to understand that there are many other vulnerable securities in a credit risk fund. If your risk appetite doesn’t match the scheme’s investment strategy, you need to take a call,” says Vishal Dhawan.
DSP Mutual Fund did not respond to our calls.