ICRA : reaffirms its credit risk ratings for the various debt schemes of BOI AXA Investment Managers Private Lim...

June 09, 2017

BOI AXA Investment Managers Private Limited

Summary of rated instruments

Instrument*	Rating Action
BOI AXA Liquid Fund	[ICRA]AAAmfs; reaffirmed
BOI AXA Capital Protection Oriented Fund - Series 2	[ICRA]AAAmfs (SO); reaffirmed
BOI AXA Capital Protection Oriented Fund - Series 3	[ICRA]AAAmfs (SO); reaffirmed
BOI AXA Capital Protection Oriented Fund - Series 4	[ICRA]AAAmfs (SO); reaffirmed
BOI AXA Capital Protection Oriented Fund - Series 5	[ICRA]AAAmfs (SO); reaffirmed

*Instrument details are provided in Annexure-1

Rating action

ICRA has reaffirmed the credit risk rating of [ICRA]AAAmfs (pronounced ICRA triple A m f s) for the BOI AXA Liquid Fund of BOI AXA Investment Managers Private Limited (the AMC). Schemes with this rating are considered to have the highest degree of safety regarding timely receipt of payments from the investments that they have made1.

ICRA has also reaffirmed the credit risk rating of [ICRA]AAAmfs (SO) (pronounced ICRA triple A m f s structured obligation) for BOI AXA Capital Protection Oriented Fund - Series 2 - 5 of the AMC. Schemes with this rating are considered to have the highest degree of safety regarding timely receipt of payments from the investments that they have made. The letters SO in parenthesis suffixed to a rating symbol stand for Structured Obligation. An SO rating is specific to the rated issue, its terms, and its structure. SO ratings do not represent ICRA's opinion on the general credit quality of the issuers concerned.

The ratings should, however, not be construed as an indication of the performance of the mutual fund scheme or of volatility in its returns.

Rationale

ICRA's mutual fund rating methodology is based on evaluating the inherent credit quality of the fund's portfolio. As a measure of the credit quality of a debt fund's assets, ICRA uses the concept of "credit scores". These scores are based on ICRA's estimate of the credit risk associated with each exposure of the portfolio taking into account its maturity. To quantify the credit risk scores, ICRA uses its database of historical default rates for various rating categories and various maturity buckets. The credit risk ratings incorporate ICRA's assessment of a debt fund's published investment objectives and policies, its management characteristics, and the creditworthiness of its investment portfolio. ICRA reviews relevant fund information on an ongoing basis to support its published rating opinions. If the portfolio credit score meets the benchmark of the assigned rating during the review, the rating is retained. In an event that the benchmark credit score is breached, ICRA gives a month's time to the debt fund manager to bring the portfolio credit score within the benchmark credit score. If the debt fund manager is able to reduce the portfolio credit score to within the benchmark credit score, the rating is retained. If the portfolio still continues to breach the benchmark credit score, the rating is revised to reflect the change in credit quality.

1For complete rating scale and definitions, please refer to ICRA's website (www.icra.in) or other ICRA rating publications

The ratings have been reaffirmed following ICRA's analysis of the credit risk profile of the month end portfolio positions for these schemes. The credit risk scores for these schemes were comfortably within the benchmark limits for their current level of ratings.

Analytical approach:

For arriving at the ratings for the debt schemes, ICRA has assessed the credit risk profile of the month end portfolio position for these schemes for the past 12 months.

Links to applicable criteria:

Rating Methodology for Mutual Funds

About the company: BOI AXA Investment Managers Private Limited

BOI AXA Investment Managers Private Limited (formerly Bharti AXA Investment Managers Private Limited) is a joint venture between Bank of India (BOI) and AXA Investment Managers Asia Holdings Private Limited (AXA). On May 7, 2012, BOI acquired 51% stake in the AMC from Bharti Ventures Limited and became a joint venture partner with AXA, which holds the remaining 49% stake. Consequent to the change in the shareholding, the AMC was renamed as BOI AXA Investment Managers Private Limited. The AMC had average assets under management of around Rs. 3,552 crore2during Q4FY2017.

BOI AXA Liquid Fund

Launched in July 2008, BOI AXA Liquid Fund is an open-ended liquid scheme with the objective to deliver reasonable market related returns with lower risk and higher liquidity through a portfolio of debt and money market instruments. The scheme's assets under management stood at Rs. 757 crores as on April 30, 2017 and had an average residual maturity of ~1 month as on that date. The scheme primarily invests in money market instruments of highest credit quality.

BOI AXA Capital Protection Oriented Fund - Series 2 - 5

BOI AXA Capital Protection Oriented Fund - Series 2, a closed ended scheme with an initial tenure of 37 months, was launched in November 2014; BOI AXA Capital Protection Oriented Fund - Series 3, a closed ended scheme with an initial tenure of 41 months, was launched in January 2015; BOI AXA Capital Protection Oriented Fund - Series 4, a closed ended scheme with an initial tenure of 36 months, was launched in July 2015 and BOI AXA Capital Protection Oriented Fund - Series 5, a closed ended scheme with an initial tenure of 38 months, was launched in October 2015.

The portfolio structure for these schemes has been designed with the intention of protecting the unit holder's capital at maturity, by holding a majority of investments in debt securities maturing on or before the maturity of the scheme. The schemes invest in debt securities only with a rating of [ICRA]AAA or equivalent, mitigating any concerns on credit risk. The proportion of debt securities is calculated such that the redemption value of debt after accounting for the AMC's expenses will be equal to or greater than the initial unit holder's capital, thereby offering the highest degree of protection for the unit holder's capital at maturity. ICRA has factored in the credit risk of debt investments, reinvestment risk of interim receipts, precondition of marginal tenure mismatches and obligor concentrations.

2 100 lakh = 1 crore = 10 million

While the debt portion of the fund is passively managed the balance is invested in equity and equity linked instruments to provide upside potential to the unit holders. At the same time, given the proportion of high credit quality debt investments and the portfolio structure, the downside is protected and the investor may not suffer any loss of initial investment at the time of maturity.

Status of non-cooperation with previous CRA: Not Applicable Any other information: Not ApplicableRating history for last three years: Table:

Sr. No.

Name of Scheme

Current Rating (FY2018)

Chronology of Rating History for the past 3 years

Type

Rated amou nt

June-17

FY2017

FY2016

FY2015

Jun 2016

Nov 2015

Sep 2015

Jun 2015

May 2015

Mar 2015

Dec 2014

Nov 2014

May 2014

1

BOI AXA Liquid Fund

Long Term

-

[ICRA]AA Amfs

[ICRA]A AAmfs

[ICRA ]AAA mfs

[ICRA ]AAA mfs

[ICRA] AAAmf s

[ICRA] AAAmf s

[ICRA ]AAA mfs

[ICRA] AAAmf s

[ICRA ]AAA mfs

[ICRA ]AAA mfs

2

BOI AXA Capital Protection Oriented Fund - Series 2

Long Term

-

[ICRA]AA Amfs (SO)

[ICRA]A AAmfs (SO)

[ICRA ]AAA mfs (SO)

[ICRA ]AAA mfs (SO)

[ICRA] AAAmf s (SO)

[ICRA] AAAmf s (SO)

[ICRA ]AAA mfs (SO)#

Provisi onal [ICRA] AAAmf s (SO)

Provisi onal [ICRA ]AAA mfs (SO)

Provisi onal [ICRA ]AAA mfs (SO)

3

BOI AXA Capital Protection Oriented Fund - Series 3

Long Term

-

[ICRA]AA Amfs (SO)

[ICRA]A AAmfs (SO)

[ICRA ]AAA mfs (SO)

[ICRA ]AAA mfs (SO)

[ICRA] AAAmf s (SO)

[ICRA] AAAmf s (SO)

[ICRA ]AAA mfs (SO)#

Provisi onal [ICRA] AAAmf s (SO)*

-

-

4

BOI AXA Capital Protection Oriented Fund - Series 4

Long Term

-

[ICRA]AA Amfs (SO)

[ICRA]A AAmfs (SO)

[ICRA ]AAA mfs (SO)

[ICRA ]AAA mfs (SO)#

Provisi onal [ICRA] AAAmf s (SO)

Provisi onal [ICRA] AAAmf s (SO)*

-

-

-

-

5

BOI AXA Capital Protection Oriented Fund - Series 5

Short Term

-

[ICRA]AA Amfs (SO)

[ICRA]A AAmfs (SO)

[ICRA ]AAA mfs (SO)#

Provisi onal [ICRA ]AAA mfs (SO)

Provisi onal [ICRA] AAAmf s (SO)*

-

-

-

-

-

* - Initial rating assigned

# - Provisional rating confirmed as final

Complexity level of the rated instrument:

ICRA has classified various instruments based on their complexity as "Simple", "Complex" and "Highly Complex". The classification of instruments according to their complexity levels is available on the websitewww.icra.in

Annexure-1 Instrument details

Name of the Instrument	Date of Issuance	Coupon Rate	Maturity Date	Amount Rated (Rs. crore)	Current Rating and Outlook
NA	NA	NA	NA	NA	NA