March 09, 2017

Did Taurus MF Conceal the BILT December Downgrades?

A short post about some disturbing observations.

As I noted in my last post, on 30 December 2016, India Ratings and Research (Ind-Ra) downgraded its rating of the commercial paper of Ballarpur Industries Ltd (BILT) and BILT Graphic Paper Products Ltd (BGPPL) from Ind A1 to Ind A3.  But Taurus MF didn’t show this downgrade in their statutory portfolio disclosure as on 31 December 2016 (as it should have).  Instead, it continued to show the rating of the commercial paper of these companies as Ind A1.  It was only in the portfolio disclosure as on 31 January 2017 that it showed the downgraded rating for the first time.  Going by the file metadata, this information was uploaded on its website on 10 February 2017

But then for most individual investors, the fact sheet is the preferred source of scheme information updates.  Here, too, the information about the downgrade did not feature in the December 2016 fact sheet (as it should have).  Instead, it appeared in the January 2017 fact sheet which, going by the file metadata, was uploaded on the fund house’s website on 21 February 2017, just one day before the final downgrade, and the fall in NAVs

This means that

  1. For over a month, all existing and prospective investors in those schemes were wrongly led to believe that those schemes had high quality portfolios.
  2. Any existing investor who relied upon the fact sheet for his/ her information and wanted to exit (based upon the December downgrade) would have had no time to exit because the very next day (after the January 2017 fact sheet was presumably uploaded), the NAVs crashed. In other words, such investors were deprived of their right to act upon information which should have been made available to them much, much earlier

This certainly calls for a deeper investigation.

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