July 8, 2022
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LIC Mutual Fund to absorb IDBI Mutual Fund
To fulfill regulatory norms after two attempts to find a buyer for IDBI Mutual Fund failed, LIC Mutual Fund has started the process of absorbing IDBI Mutual Fund
IDBI Bank-promoted IDBI MF had to be either sold or merged with LIC MF because, under Sebi rules, one promoter cannot have more than 10% stake in two mutual funds. LIC, the promoter of LIC MF, took a controlling stake in IDBI Bank in 2019.
Valuations have been completed and both sides will approach the Securities and Exchange Board of India later this month to start the process. The merger is expected to be completed this quarter, said a person who didn’t want to be named.
There are some matters of tax to be clarified because this is a merger of schemes and not a share sale as the promoter is the same. All formalities are expected to be completed by the end of the month.
Earlier ,in November 2019, Kerala-based NBFC, Muthoot Finance had signed a share purchase agreement to acquire IDBI MF for Rs 215 crore. However, after almost a year of waiting, the deal could not be completed since the RBI did not give its assent.
“The bouquet of products offered by the combined entity will increase sharply and the total equity assets will get a step up,” said Kaustubh Belapurkar, director, fund research, Morningstar India.
Sebi rules on categorisation of schemes stipulate that a fund house can have only one scheme in each category and any duplicates need to be consolidated. Hence, mergers are the best fit for fund houses when schemes don’t overlap. Both are relatively small in the Rs 37.22 lakh crore mutual fund industry. LIC MF has assets of Rs 17,195 crore and is ranked 22 out of 43, while IDBI MF has assets worth Rs 3,845 crore and is ranked 30.
While LIC has a larger presence in the debt and passive equity products space, IDBI MF is strong in the actively managed equity funds space. A few schemes in the equity space – large cap, large and midcap, tax saver and flexi cap – are common between the two. IDBI MF has focused, value, midcap, health care and small cap schemes, which are not present in the LIC portfolio.
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