(Bloomberg) -- Indian mutual funds are carving out their investments in troubled Vodafone Idea Ltd.’s debt into separate portfolios as they seek to limit any fallout from a possible default by the telecom carrier.

UTI Mutual Fund and Nippon Life India Asset Management moved to ring-fence their holdings in Vodafone Idea’s debt on Monday after credit assessor Care Ratings Ltd. downgraded the carrier’s borrowings, statements from the companies show. Last month, Franklin Templeton Mutual Fund also segregated the company’s debt.

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India’s top court has asked the nation’s mobile carriers to deposit a combined $13 billion in past dues for spectrum and licenses in a month, rejecting their plea for extended payment. Vodafone Idea, which owes the government the most among its peers, said its ability to continue as a going concern depends on whether the court will modify a previous order that had set Jan. 24 as the deadline for payment.

After a series of defaults in the last 18 months amid a prolonged credit crisis, mutual funds are struggling to protect value for their unit holders. In 2018, markets regulator Securities and Exchange Board of India allowed asset managers to separate distressed, illiquid and hard-to-value assets to prevent them from damaging the returns generated by more liquid, better-performing assets.

Care Ratings cut Vodafone Idea’s bonds and loans to BB- from BBB- Monday, citing a sharp erosion in the overall risk profile of the company after the top court offered no relief for its fee payment.

To contact the reporter on this story: Rahul Satija in Mumbai at rsatija1@bloomberg.net

To contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, Anto Antony, Ken McCallum

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