IDBI Mutual Fund signed an agreement on Thursday to transfer its schemes to LIC Mutual Fund, IDBI Bank informed the exchanges. The decision has been taken to comply with Regulation 7B of SEBI Mutual Fund Regulations, the notification said.
As per the norms, a sponsor of a mutual fund (MF) including associate or group company and asset management company of the fund cannot individually or collectively, directly or indirectly, hold over 10 per cent of the shareholding or voting rights in another asset management or trustee company.
In the event of a merger or acquisition, sponsors of the MFs will have one year to comply with these norms, according to SEBI.
This clause was triggered after Life Insurance Corporation of India took over IDBI Bank in January 2019. While IDBI Bank is the sponsor to IDBI Mutual Fund, LIC has its own fund house — LIC Mutual Fund — leading to expectations of the two fund houses being merged.
However, employees of IDBI Mutual Fund had, instead, proposed a reverse merger, saying it does not make sense for a profit-making IDBI Mutual Fund to be absorbed by a loss-making LIC Mutual Fund. They had also called for open market sourcing to extract the right valuation for the fund house, as per reports.
IDBI Mutual Fund had average assets under management of ₹3,761 crore and LIC Mutual Fund of ₹17,879 crore in July-September.