Indian mutual funds need to improve their due diligence before investing in corporate bonds and not rely only credit ratings given rising concerns about potential defaults, the chairman of Securities and Exchange Board of India (SEBI) said on Thursday.
The warning by SEBI Chairman Ajay Tyagi comes as a few organizations, including Amtek Auto, Jindal Steel and Power Ltd, Ballarpur Industries, have defaulted on their debt coupon payments over the past few years.
“Mutual funds need to further strengthen their own due diligence and evaluation mechanism and not just depend on credit rating agencies,” Tyagi said in a discourse at a mutual funds conference.
Tyagi likewise said large institutional investors needed to be more “actively involved” in monitoring corporate governance at organizations, an issue in the limelight after tussles between Tata Group and ousted Chairman Cyrus Mistry.
Management at Infosys Ltd has likewise engaged in a public spat with founders over a range of issues, including remuneration for officials.
Tyagi also reiterated the requirement for asset managers to consolidate plans saying the launch of too many funds was creating confusing.