Two mutual funds mark down IL&FS SPV debt

Two of the country’s biggest mutual funds have marked down the value of debt issued by two special purpose vehicles (SPVs) of Infrastructure Leasing & Financial Services as the troubled infrastructure investor’s financial woes continue to rattle financial markets.

Four months after parent IL&FS sparked a major crisis with its default prompting a rare government intervention, its cash-rich and profitable SPVs are now giving a different kind of headache to mutual funds and other debt investors. Aditya Birla Sun Life Mutual Fund and HDFC Mutual Fund on marked down the value of investments in debt securities of two road projects owned by a unit of IL&FS after one of them defaulted and the prospect of the other following suit remained high.

Crisil downgraded bonds sold by Jharkhand Road Projects Implementation Company (JRPICL) to junk status and similar action awaits many of the road projects that are generating cash. But fund managers tried to calm nerves saying the developments were due to litigation. Rival rating agency ICRA has placed six schemes belonging to mutual funds of Aditya Birla Sun Life, HDFC and UTI on rating watch due to deterioration in credit quality of underlying investments.