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After two unsuccessful attempts of finding a buyer, LIC mutual fund is all set to absorb the IDBI mutual fund.
For the unversed, LIC Mutual fund had taken a controlling stake in IDBI Mutual fund back in 2019.
Now, as per SEBI rules, one promoter can't have more than a 10% stake in two mutual funds.
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"As part of regulatory compliance, LIC MF proposes to take over schemes of IDBI MF, subject to regulatory approvals," said T Ramakrishnan, MD, LIC Mutual Fund. "This proposed scheme acquisition transaction will result in the merger of like-to-like schemes wherein unique schemes of IDBI MF will continue on a stand-alone basis with the acquiring entity and the merger process is underway."
The valuations for the said transaction have been completed and both the companies later this month will approach the Securities and Exchange Board of India (SEBI) to initiate the absorption process.
After LIC had completed the IDBI Bank's (NSE -0.49%) takeover in November 2019, Muthoot Finance signed a share purchase agreement to acquire IDBI MF for ₹215 crores. However, the Reserve Bank of India (RBI) did not give its assent for the same and the transaction stood still for almost a year after which the transaction had to be called off.
"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 of fund research, Morningstar India.
With both the company's schemes not overlapping, a merger could be the best fit. LIC MF has a total AUM of ₹17,195 crores and is ranked 22 out of 43, having its presence both in the debt and passive equity market, while IDBI MF has an AUM worth ₹3,845 crore and is ranked 30 marking its presence majorly in the active equity segment.
-by Gautam
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