Yes. It is very important that investors keep a check of the price of companies whose bonds are held in his/her debt mutual fund. This is because lower share price of a company may not directly impact the bond issued by the company, but it will certainly hurt the price of the bond if it is used as a collateral against any loan.

When debt funds are lent against shares, they take cover that’s up to 1.5-2 times the loan value. However, when the value of underlying shares fall sharply, funds ask for additional top-up in the form of more pledged shares to make up for the shortfall.

In the recent example of Essel debt crisis, some mutual funds lent heavily against the shares that were pledged by the promoter. The situation aggravated for debt mutual funds when Zee Enterprises’ shares plunged nearly 33% on 25 January after reports said the group would figure in a probe linked to demonetisation-led deposits.