Deewan Housing Finance Corporation Ltd (DHFL) has been in news since September 2018. First, DSP Mutual Fund sold its then Aaarated paper at 11% yield indicating lower credit quality. It was followed by a downgrade.In January, Cobrapost accused the company of a financial scam. In May, it halted accepting fresh deposits, renewal of fresh deposit and stopped premature withdrawal of deposits. Earlier this month, it failed to repay about ₹900 crore of obligations which led to downgrade in its ₹850 croreworth commercial paper to ‘D’ investment grade. After the downgrade, the company managed to repay around ₹45-crore bond interest. “The company has been under pressure since the IL&FS issue. But it is not just DHFL, the broader financial sector has been under pressure. However, even though they missed a payment schedule last week, they subsequently paid it off. As of now, there are no more delays. They are no longer in a default position but the impact of the subsequent downgrades will take time to recuperate,” a debt fund manager said on the condition of anonymity.THE IMPACT ON DEBT FUNDSOut of 1,058 total debt funds that exist in the market, 211 debt funds have exposure to DHFL, according to data provided by Valueresearchonline.com. An industry average of ₹19.12 crore worth of the assets of each of the individual funds is exposed to DHFL. The fund with the highest asset exposure to DHFL is DHFL Pramerica Floating Rate Fund, with 53.03% of its assets exposed to DHFL.The value of these assets was ₹4.13 crore. Tata Corporate Bond Fund - Retail Plan has 36.83% of exposure worth ₹25.6 crore, as of May 31. Value-wise, the highest exposure to DHFL was in the UTI Short Term Income Fund- Regular Plan, with an asset exposure of 11.65%. But the exposure is worth₹324.34, according to the same data.“If your fund is exposed to DHFL, there is not much you can do now as most of the funds have written down their net asset value (NAV) by 75%, as the rating has been downgraded to default grade. But such investors should take heart in the fact that the problem DHFL is facing is primarily due to liquidity and not any fraud,” said Raghvendra Nath, managing director at Ladderup Wealth Management Pvt Ltd.Experts believe that sooner or later the company will be able to get out of the current crisis.“The valuations and NAV may have taken a hit but it can be reverted if their debt is repaid on time. Your money will not become zero. If debts are paid on the maturity date, you will not have to take a haircut and in case of any delay, there may be a haircut of 50-60%,” said Alok Singh, CIO, BOI AXA Mutual Fund. Currently, the secured NCDS have taken a haircut of 75% and rating agencies have suggested a haircut of 100% in unsecured loans, Singh added.For long-term investors, the returns may not get compromised but if any of the investors go for redemption, their positions will get affected. “There has been a mark to market impact in their NAVS and they will have to take subsequent haircuts, but these are standard haircuts and the situation may start to get normal hereafter. With all the stake sales coming in, liquidity will start to get back in shape,” said the fund manager.