IDBI Mutual Fund, in a letter to its unitholders, has informed them about the merger/transfer of schemes pursuant to the acquisition of the AMC by LIC Mutual Fund. The deal gives LIC Mutual Fund the right to manage and administer the schemes of IDBI Mutual Fund. As a part of the deal, LIC Mutual Fund Trustee Company will also acquire IDBI Mutual Fund Trustee Company. On the completion of the proposed transaction, IDBI Bank Limited will also cease to be the sponsor in respect of the IDBI Mutual Fund schemes, and LIC (currently the sponsor for LIC Mutual Fund) will assume sponsorship of the IDBI Mutual Fund schemes.

The Securities and Exchange Board of India (SEBI) granted its approval for the proposed transaction in April 2023, while the proposed deal was approved by the Competition Commission of India (CCI) in March 2023.

[Read: CCI Approves LIC Mutual Fund’s Acquisition of IDBI Mutual Fund. What Should Investors Do?]

At present, IDBI Mutual Fund has 20 open-ended schemes that will undergo merger/transfer to avoid the existence of two similar schemes and to present to the unitholders a simplified range of schemes.

The following schemes of IDBI Mutual Fund will be merged with similar schemes of LIC Mutual Fund. Barring IDBI Credit Risk Fund, which will be converted into a Medium to Long Duration Fund, all other schemes will continue to be placed into their respective existing categories after the completion of the acquisition.

Transferor scheme Transferee scheme Surviving scheme Scheme category
IDBI Equity Advantage Fund LIC MF Tax Plan LIC MF ELSS ELSS
IDBI Flexi Cap Fund LIC MF Flexi Cap Fund LIC MF Flexi Cap Fund Flexi Cap Fund
IDBI India Top 100 Equity Fund LIC MF Large Cap Fund LIC MF Large Cap Fund Large Cap Fund
IDBI Banking & Financial Services Fund LIC MF Banking and Financial Services Fund LIC MF Banking and Financial Services Fund Sectoral Fund
IDBI Hybrid Equity Fund LIC MF Equity Hybrid Fund LIC MF Aggressive Hybrid Fund Aggressive Hybrid Fund
IDBI Nifty 50 Index Fund LIC MF Nifty 50 Index Fund LIC MF Nifty 50 Index Fund LIC MF Nifty 50 Index Fund
IDBI Liquid Fund LIC MF Liquid Fund LIC MF Liquid Fund Liquid Fund
IDBI Short Term Bond Fund LIC MF Short Term Debt Fund LIC MF Short Duration Fund Short Duration Fund
IDBI Ultra Short Term Fund LIC MF Ultra Short Term Fund LIC MF Ultra Short Duration Fund Ultra Short Duration Fund
IDBI Credit Risk Fund LIC MF Bond Fund LIC MF Medium to Long Duration Bond Fund Medium to Long Duration Fund

(Source: IDBI Mutual Fund

Furthermore, the following schemes will be carried over by LIC Mutual Fund and there will be no change in character or features of the schemes except the name:

Existing schemes of IDBI MF Scheme name post acquisition
IDBI Dividend Yield Fund LIC MF Dividend Yield Fund
IDBI Focused 30 Equity Fund LIC MF Focused 30 Equity Fund
IDBI Midcap Fund LIC MF Midcap Fund
IDBI Healthcare Fund LIC MF Healthcare Fund
IDBI Small Cap Fund LIC MF Small Cap Fund
IDBI Long Term Value Fund LIC MF Long Term Value Fund
IDBI Equity Savings Fund LIC MF Equity Savings Fund
IDBI Gold Exchange Traded Fund LIC MF Gold Exchange Traded Fund
IDBI Nifty Next 50 Index Fund LIC MF Nifty Next 50 Index Fund
IDBI Gold Fund of Fund LIC MF Gold Fund

(Source: IDBI Mutual Fund

IDBI Mutual has sought the approval of unitholders through a ballot for the change in asset management company of the schemes from IDBI AMC to LIC AMC. The voting window will remain open from June 20, 2023, until July 19, 2023 (both days inclusive). As per the letter from IDBI Mutual Fund, all duly signed and filled-up ballot papers received by the Registrar, as well as electronically received votes, will be accepted and considered valid for determining the ballot results. Each unitholder will be entitled to cast one vote for each unit held.

Since the merger/transfer of schemes amounts to changes in fundamental attributes, the unitholders who do not consent or agree to the proposed changes have the option to exit the schemes without any exit load before July 19, 2023. The exit option is available to all unitholders except for those who have invested in schemes which are subject to mandatory lock-in period such as ELSS (Tax Saving Mutual Fund).

Investors who have registered for Systematic investment facilities such as SIP/STP/SWP in the merging scheme, and decide to continue their investments i.e. do not opt for the exit option, then such SIP/STP/SWP registrations will continue to be processed under the respective Plan/Option of the surviving scheme from the effective date and no fresh registration will be required. Further, investors who have registered for Systematic investment facilities in the scheme and who do not wish to continue their future investment facilities will have to apply for cancellation of such registrations.

At the end of the exit window period and voting exercise, IDBI Mutual Fund will notify the unitholders about the date on which the scheme mergers and transfers will take place.

How will this affect investors?

A change in ownership does not always warrant portfolio action. Some schemes of LIC Mutual Fund and IDBI Mutual Fund have done well in the past, while several others have not fared so well. Thus, it is important to pay attention to the changes and practices put in place by LIC Mutual Fund post acquisition of IDBI Mutual Fund and how prudently they manage investors’ money.

It will be too early to conclude that the merger of schemes will improve or deteriorate their performance. However, watch out for any major changes in the portfolio attributes of the schemes.

If the merged scheme follows a more aggressive/conservative investment approach than the current scheme and is no longer in congruence with the investor’s risk profile, or if the investment objective of the merged scheme does not align with their investment objective, they may consider exiting the scheme during the free exit load period.

For those who have invested in any of these schemes, keep track of the performance of the schemes post acquisition and take an informed decision. Consider looking for alternatives only if they show prolonged underperformance compared to the benchmark and category average.

Before taking any investment decisions, one should evaluate their investment objective, risk appetite, and investment horizon and select the most suitable scheme that scores well on quantitative as well as qualitative parameters.

To find out PersonalFN’s latest views on IDBI Mutual Fund and LIC Mutual Fund, subscribers can login to their account.

This article first appeared on PersonalFN here

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