LIC Mutual Fund to takeover IDBI Mutual Fund

Lately, we have witnessed a lot of mergers and acquisitions in the mutual fund industry and recently LIC MF is headed towards the process of acquiring IDBI MF. Read on to find out more. 

Mutual fund industry in a race to gain assets or earn profit by exiting the MF business is taking the mergers and acquisitions root. We have seen a lot of it happening lately. 

Adding to the same, even the IDBI MF was on sale, where its last attempts had failed. However, its LIC Mutual Fund had begun the process to fulfil regulatory norms of taking over IDBI MF. 

As per the rules of the Securities and Exchange Board of India (SEBI), one promoter cannot have more than a 10% stake in two mutual fund companies. Life Insurance Corporation of India (promoter of LIC MF), in 2019 had acquired a controlling stake in IDBI Bank. 

While speaking to the media, T Ramakrishnan, MD, LIC Mutual Fund said, "As part of regulatory compliance, LIC MF proposes to takeover schemes of IDBI MF, subject to regulatory approvals." 

He further added that "this proposed scheme acquisition transaction will result in 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 assets of LIC MF are worth Rs 17,195 crore, possessing 22nd rank of 43 fund houses. IDBI MF, on the other hand, holds worth Rs 3,845 crore. 

Post-merger, the assets of LIC MF would likely be near Rs 21,000 crore (this would change as the process is likely to be completed at the end of this quarter). 

Few schemes such as large-cap, large & mid-cap, Equity Linked Saving Scheme (ELSS) and Flexi-cap funds are common in LIC MF as well as IDBI MF. 

Looking at their product portfolio, we observed that LIC MF is well placed in fixed income (debt) and passive equity funds area, while IDBI MF is well placed in actively managed equity funds. 

This merger would prove to be quite beneficial for LIC MF as IDBI MF already has funds in the equity space, which LIC MF presently does not deal in.