Nippon India Mutual Fund to side-pocket exposure to Yes Bank securities

Nippon India Mutual Fund has decided to side-pocket their exposures to Yes Bank bonds following the rating downgrade of troubled private lender's debt instruments. According to the fund house, the move will prevent the distressed assets from damaging the returns generated from more liquid and better-performing assets.

“Nippon India Strategic Debt Fund, Nippon India Credit Risk Fund, Nippon India Hybrid Bond Fund, Nippon India Equity Hybrid Fund and Nippon India Equity Savings Fund (“the Schemes”) have exposure in perpetual bonds issued by Yes Bank Limited (“the Issuer”) under Additional Tier 1 (AT1) Basel III framework,” the fund house said in a statement.

The statement also said that as per the draft release “Yes Bank Limited reconstruction scheme 2020” by the Government of India dated March 6, 2020, the instruments qualifying as AT1 Capital, issued by Yes Bank Ltd. under Basel III framework, shall stand written down permanently.


Further as on March 6, 2020, rating agency ICRA has downgraded the rating of Yes Bank Limited to “D”, that is, below investment grade.

“In view of these developments, it is proposed to create segregated portfolio of securities of Yes Bank Limited held in the schemes with effect from March 6, 2020, subject to approval from the Board of Directors of Nippon Life India Trustee Limited (formerly known as Reliance Capital Trustee Co. Ltd) (the Trustees). Further, processing of subscriptions and redemptions in the schemes would be suspended on the day of the credit event (March 6, 2020) till Trustee approval for segregation is received, as per Regulatory guidelines,” the fund house said.

The fund house also said that suspension of processing of subscription/ redemption is applicable to fresh subscription, additional subscription, switchin, subscription by way of Systematic Investment Plan (SIP) including existing SIPs, Systematic Transfer Plan (STP) including existing STPs or subscription by way on any other mode(s)/facility(ies), full & partial redemption, switch outs and withdrawals through any mode such as Systematic Withdrawal Plan (SWP).

Moreover, the subscription limit of INR 2 Lakh per day per scheme per investor introduced earlier on 5th March 2020. Read full story here: Nippon India Mutual Fund marks down Yes Bank perpetual bonds to zero