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Veena Venugopal

Mumbai , Feb. 20

THE Securities and Exchanges Board of India (SEBI) has approved the acquisition of the mutual fund schemes of Sun F&C Mutual Fund by Principal India.

The two companies had announced a memorandum of understanding for the acquisition in April 2003. The deal had since been awaiting SEBI clearance.

"Procedural issues like which side would give investors' exit option, etc were being clarified by SEBI," said Mr Anurag Madan, Chief Operating Officer, Sun F&C. Though SEBI has indicated the deal is approved, both parties have not received the official letter.

At the time of announcement, Principal had assets worth about Rs 2,300 crore under management, and was to take over about Rs 500 crore in assets managed by Sun F&C and a retail client base of over 70,000 investors. Assets under management of Principal have now grown to over Rs 3,500 crore while those of Sun F&C has shrunk to Rs 221 crore.

The main feature of this deal is the funds of Sun F&C are to be merged with Principal.

In other deals in the industry, the funds of the two entities are being run concurrently. Franklin Templeton had, however, earlier this year, indicated its intention to prune the list of funds to avoid duplication between its original funds and those acquired from Kothari Pioneer Mutual Fund.

The next step in the acquisition process of Sun F&C would be sending the necessary communication to investors and this would be initiated next month, say company officials. There is a provision that unit holders be given 30 days' clear time before the schemes are handed over to the acquiring entity.

"Once the investor notification exercise is completed, the actual transfer of assets would take place," said Mr Madan. The valuation of the deal is expected to be declared after this.

Market rumours at the time of announcement of the acquisition indicated a payout of Rs 20 crore, at 4 per cent of the value of assets.

"Now that SEBI approval has been obtained, we are initiating the necessary next steps in the deal," said a Principal official.

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