TCS cut its mutual fund units exposure by about 20% to Rs 4,926 crore at the end of September 2018 compared to Rs 6,370 crore at the end of June 2018
IT firms Infosys and TCS have slashed their exposure to liquid mutual funds in September quarter amid fears of liquidity crisis in the non-banking finance companies (NBFC) sector, in which liquid MFs have significant investments.
In its current investments, TCS cut its mutual fund units exposure by about 20% to Rs 4,926 crore at the end of September 2018 compared to Rs 6,370 crore at the end of June 2018. Infosys held investment in liquid MF units worth Rs 870 crore at the end of September 2018, over 43% lower than Rs 1,535 crore held in liquid MF units on June 30.
Infosys appears to have favoured parking money in banks over liquid MFs. The Bengaluru-headquartered IT giant upped its exposure to deposit accounts in banks to Rs 9,972 crore at the end of September 30, an over 40% jump over Rs 7,036 crore held in deposit accounts across different banks at the end of June 30, according to financial data shared by Infosys. TCS upped its exposure to banks' current accounts with Rs 5,322 crore at the end of September 2018 compared to Rs 3,911 crore in the same basket in June-end.
While not commenting directly on Infosys's activity, Vidya Bala, head of mutual fund research, FundsIndia, said the exodus from liquid and ultra short funds suggests that corporate/institutional investors have been spooked by a potential liquidity tightening situation in NBFCs. "NBFC commercial papers less than 180 days accounted for a fifth of debt MF holdings. However, FD rates do not match the returns of debt MFs. Hence it may likely be a flight to perceived safety," she said.
In its investor concall with analysts on October 16, Infosys CFO Ranganath Mavinakere said yield on cash for the September quarter was 7.53% as compared to 7.2% last quarter.
Infosys also reduced its deposits kept with non-banking financial institutions. It had Rs 5,911 crore (Rs 4311 crore in HDFC and Rs 1,600 crore in LIC Housing Finance) at the end of September 30 compared to Rs 7472 crore (Rs 6272 crore in HDFC and Rs 1,200 crore in LIC Housing Finance) as on June 30.
According to Infosys, the credit risk on cash and cash equivalents is limited as it generally invests in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include liquid mutual fund units, fixed maturity plan securities, quoted bonds issued by government and quasi government organisations, non convertible debentures, certificates of deposit and commercial papers.
Investors took out a record Rs 2.11 lakh crore, the highest monthly net outflow ever liquid/income funds category, in September 2018 alone amid volatile debt markets. While the normal trend is that in the last month of every quarter the fundhouses witness redemptions in liquid/money market funds due to tax outgoes, the IL&FS credit event and the perception about liquid MFs did take a hit.
THE FD HAVEN
- TCS cut its mutual fund units exposure by about 20% to Rs 4,926 crore at the end of September 2018 compared to Rs 6,370 crore at the end of June 2018
- Infosys held investment in liquid MF units worth Rs 870 crore at the end of September 2018, over 43% lower than Rs 1,535 crore held in liquid MF units on June 30.
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 "Liquid mutual funds")
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