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ICICI Mutual Fund has sought investors approval to roll over three of its fixed maturity plans -- ICICI Prudential Fixed Maturity Plan-Series 82-1,185 Days Plan M, Series 82-1,175 Days-Plan Q and Series 82-1,215 Days Plan H. Units of these three schemes were allotted in early 2018 and they are set to mature between May 27 and 31.
The notice to investors proposes to extend the maturity date to June 30, 2023.
Most of the mutual funds have been seeking roll-over of FMPs to get the benefit of extended long term capital gain and indexation benefits on their current investments.
Aditya Birla Sun Life AMC and Nippon Life India AMC also rolled-over the maturity of their closed-end funds recently.
FMPs are closed-end debt funds of three to five years tenure. They invest in debt instruments that mature before the FMPs.
Being locked-in for three-years, most of the FMPs are listed on the stock exchanges to provide an exit route for investors. However, liquidity in FMP trading on exchanges remains a concern.
Can be stay invested
An ICICI Prudential AMC spokesperson said the proposed rollover allows investors to stay invested over the rolled-over period with hold to maturity approach which may help in negating any intermittent mark-to-market impact arising from volatility in the debt markets.
The proposed rollover will also allow investors to get an indexation benefit on the Long Term Capital gains for the extended period, he said.
Automatic redemption
As the default option is redemption, investors who do not want to rollover will be repaid their money.
The net asset value of ICICI MF FMP Series 82- 1215 Plan H was ₹12.74, while it was ₹12.64 and ₹12.67 of Series 82- 1185 Plan Q and Series 82- 1185 Plan M.
Though debt fund managers do their due diligence, the credit ratings are not constant and may face default or downgrade within the three years of fund deployment posing a major risk for investors, said a mutual fund distributor.
On May 4, Nippon Life India AMC rolled over Nippon India Fixed Horizon Fund - XXXVI - Series 6 to June 12, 2023. In March, Aditya Birla Mutual Fund had rolled over six of its Fixed Term Plan Series OZ, PA, PC, PF, PK, PI and PJ.
These were launched in January-March 2018 and set to mature in April, 2021. It was extended to different dates ranging from November 2022 to April 2023. The schemes have delivered CAGR returns of 7.3-7.8 per cent since launch.
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