Fixed Income for Long Term: Bank FDs vs Debt Schemes vs Arbitrage Schemes
It is easy to decide where to put your money if the investment is for very long time. Ideally, the preferred choice for such long-term investments is equities. Even from a taxation point of view, equities remain the best choice for all income-tax brackets.
 
For fixed-income investments part, though, the choice is tricky. You can choose, based on short-term needs (including parking...
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DHFL to Exit Its Mutual Fund Business
DHFL today announced that it will completely exit its mutual fund business, DHFL Pramerica Asset Managers Pvt. Ltd (DPAM). DPAM is a joint venture between DHFL and Pramerica Financial (brand name used by Prudential Financial Inc. USA). 
 
Pramerica and DHFL formed the joint venture in 2014 and immediately expanded its business through the acquisition of Deutsche Asset Management (India) Pvt. Ltd. The transaction will not change DPAM’s scope of business, said Pramerica. 
 
DHFL holds a 50% stake in DPAM; 17.12% directly and 32.88% through its 100% subsidiary DHFL Advisory and Investments. DHFL Advisory and Investment’s main asset was the stake in this joint venture. The remaining part of DHFL Advisory and Investment consists of Rs225 crore OCDs (optionally convertible debentures) which it issued to Wadhawan Global Capital (see: https://bit.ly/2CjLP3b).
 
The transaction will make DPAM a wholly owned business of Pramerica. While Kapil Wadhawan, chairman and managing director of DHFL commented that, “This is a strategic call by DHFL to focus more on our core business”, DHFL is know to be strapped for liquidity. 
 
DHFL Asset Managers reported a revenue of Rs129.74 crore in financial year 2017-18, as against revenue of Rs109.67 crore in the previous year. It reported a profit of Rs7.76 crore in 2017-18, compared to a profit of Rs7.64 crore a year ago. DHFL’s stock ended lower by 1.83%; to close at Rs214.
 

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COMMENTS

Harish

3 months ago

Good for shareholders of DHFL

IL&FS Fallout? SEBI Allows Mutual Funds to Segregate Distressed Assets
Market regulator Securities and Exchange Board of India (SEBI) has allowed mutual funds to create segregated portfolios with respect to debt and money market instruments subject to various safeguards.
 
"This facility will be available to mutual funds based on credit events. Creating 'segregated portfolio' may be optional for mutual funds, but approval of trustees is necessary for activating such portfolio," SEBI said in a statement.
 
Creation of segregated portfolio, also known as side pocketing, is a mechanism to separate distressed, illiquid assets from other more liquid assets in a mutual fund portfolio to deal with a situation arising due to a credit event. 
 
Speaking with reporters, SEBI chairman Ajay Tyagi, said, “We will come out with a circular soon which would have adequate safeguards built-in to ensure that this facility is not misused.”
 
SEBI's move comes in the wake of defaults by Infrastructure Leasing & Financial Services (IL&FS) leading to net asset values (NAVs) of various debt schemes taking big hits. The loss in NAV of debt schemes exposed to debt papers of IL&FS was sharp, more than 8% in some cases.
 
Several mutual fund (MF) schemes hold the debt papers of IL&FS, and its subsidiaries, in large numbers. The total amount of currently outstanding debt papers held by MF schemes was valued at around Rs2,400 crore as at end-August, before the downgrade.
 
With a segregated portfolio, SEBI feels that investors who may take the hit when the credit event happens will get the upside of future recovery.
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