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15. '' Major step taken by SEBI is related to all kinds of mergers.'' In this context , explain various categories of mergers in Mutual Fund Industry and their presence in India.
SEBI has given approval to Mutual Fund to invest in unlisted companies' equity and equity-related instruments for up to 5% of Net Asset Values (NAVs) in case of open-ended Funds and 10% in case of close -ended Funds . Apart from restricting investment through very low equity participation in unlisted companies , SEBI has restricted Mutual Funds from investing in unlisted companies promoted by sponsors . It has also stipulated that the price per share paid for unlisted stocks cannot be more than the price arrived at on the basis of a formula. This is one of the most important steps in bringing Mutual Fund investment decisions in unlisted securities under the scanner. However, if fund houses were barred from investing in unlisted securities, they could have missed the opportunity of investing in companies like TCS and Bharti Tele-Ventures . Another major step SEBI has taken is related to all kinds of mergers . Before going in for any merger , Mutual Fund should inform the investors and SEBI about possible post-merger implications.
Ans: Mergers in Mutual Fund Industry can be broadly categorized into three categories:
i. Scheme takeover
ii. Merger of AMCs
iii. Change in the Trust (Change in Sponsor).
Most globally well-known Investment Banks , which rushed into the Indian Mutual Fund markets since 1994, either through joint venture with Indian Partner or through fully-owned Asset Management Company , appear to be reconsidering their plans in India They are going either for expansion of assets or consolidation to assert their stand in the competitive market of Mutual Fund Indistry. Due to the number of ownership changes in the Industry , the regulatory framework governing Mutual Fund Industry seems inadequate to deal with the host of new issues emerging from the change of control. The experience with change in control of AMCs reveals several lacunae in the regulatory framework.