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Mutual fund houses stick with Paytm although stock declines

Paytm’s parent company remained on a free fall since a dismal listing in November, eroding more than half of investor wealth. (Photo: HT)Premium
Paytm’s parent company remained on a free fall since a dismal listing in November, eroding more than half of investor wealth. (Photo: HT)

Mirae Asset Mutual Fund has increased its holding in One97 Communications through several schemes in December even as shares of Paytm’s parent company remained on a free fall since a dismal listing in November, eroding more than half of investor wealth

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NEW DELHI : Mirae Asset Mutual Fund has increased its holding in One97 Communications through several schemes in December even as shares of Paytm’s parent company remained on a free fall since a dismal listing in November, eroding more than half of investor wealth.

Meanwhile, other mutual fund houses such as HDFC Asset Management Company and BNP Paribas Mutual Fund have trimmed their holdings or completely exited Paytm during December, data from ValueResearch showed.

Overall, mutual funds, through 19 schemes, held 6.874 million Paytm shares valued at 917 crore at the end of December, compared with 5.753 million shares worth 977.80 crore at the end of November. This showed that despite a 40% increase in holdings of Paytm shares by mutual funds since the anchor allotment, there has been a 13% drop in the overall valuation of their holdings till December-end.

Shares of Paytm have been on the decline ever since brokerage Macquarie Capital Securities initiated coverage on the company with a target price of 1,200, implying 44% downside over the issue price. Paytm closed 5.08% lower at 1,027.70 on the NSE on Thursday.

However, despite a 21% plunge in the stock during November over the issue price, fund houses such as HDFC, Aditya Birla Sun Life and BNP Paribas largely stayed put, while Mirae MF bought more Paytm shares in its existing four schemes and added a new fund, Mirae Asset Tax Saver Fund, holding the company.

The trend stayed the same during December when Mirae MF bought more Paytm shares via its existing schemes and added two more funds despite a further 18% plunge in the stock. At the end of the month, Mirae MF through its seven schemes was holding 3.814 million shares of Paytm at 509.06 crore, rising from 2.199 million shares worth 373.69 crore at the end of November.

The asset management company declined to respond to queries on Paytm saying it doesn’t comment on individual stock holdings.

Meanwhile, Aditya Birla Sun Life MF, which didn’t tweak its total holding of 2.760 million Paytm shares held via its nine schemes, saw the total value plummeting fall 20% month-on-month sequentially to 373.69 crore at the end of December. 

“Ideally, mutual funds are expected to be long-term investors. So, what ABSL MF or Mirae are doing is probably correct if they have a conviction on the stock," said Kirtan Shah, founder and CEO, Credence Wealth Advisors.

Also, BNP Paribas has completely exited its position in Paytm through its Large Cap Fund, while HDFC Mid-Cap Opportunities Fund also sold all its shares.

HDFC MF still has exposure in the financial services company through its Large and Mid Cap Fund and Banking and Financial Services Fund. However, HDFC Balanced Advantage Fund has sold over 90% of its Paytm shares.

“…what typically mid-cap or balance advantage of HDFC MF or BNP Paribas are doing is more of a momentum-based investing method. So, if the fund is following this method, then probably they have the right to sell because they are going to buy what is in the momentum or sell what is not in momentum," added Credence Wealth Advisors' Shah.

Experts said the plunge in the Paytm stock won’t have a major impact on Mirae schemes’ performance as it usually has a maximum exposure of 1.26% to the stock in Mirae Asset Focused Fund.

“Even if you hold 1% in a particular stock, and that goes down by 50%, it is going to impact your NAV (net asset value) by point 0.5% on the downside," said Shah.

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