Groww to Acquire Indiabulls Mutual Fund. What Does it Mean for Investors?

Mar 21, 2023 / Reading Time: Approx. 7 mins

Listen to Groww to Acquire Indiabulls Mutual Fund. What Does it Mean for Investors?

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Indiabulls Mutual Fund is also set to become Groww Mutual Fund. In a notice to unitholders, Indiabulls Mutual Fund announced the change in control of Indiabulls Asset Management Company and Indiabulls Trustee Company pursuant to takeover by the new sponsor 'Nextbillion Technology', the step-down subsidiary of Groww Inc.

In May 2021, Indiabulls and Nextbillion Technology entered into a definitive agreement in which Nextbillion Technology proposed to become the new sponsor of Indiabulls Mutual Fund. Indiabulls Housing Finance, the current sponsor of Indiabulls Mutual Fund, proposed to sell their aggregate shareholding of 100% of the paid share capital of the AMC and Trustee company to Nextbillion Technology.

 

The proposed change in control received a go-head from the SEBI in December 2022. Notably, SEBI had in 2020 relaxed the eligibility criteria for sponsoring a mutual fund, thereby paving the way for Fintech companies, like Groww, to enter the mutual fund business.

Groww to Acquire Indiabulls Mutual Fund. What Does it Mean for Investors?
Image source: www.freepik.com - photo created by pressfoto
 

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About Indiabulls Mutual Fund

Incorporated in April 2008, Indiabulls Mutual Fund is a relatively small-sized asset management company having an AUM of Rs 508 Crore as of February 28, 2023. The fund house has 10 schemes, which include 4 equity schemes, 2 hybrid schemes, and 4 debt schemes.

Indiabulls Mutual Fund was established as a Trust with Indiabulls Housing Finance Ltd. as its Sponsor and Indiabulls Trustee Company Ltd. as its Trustee. Indiabulls Housing Finance Ltd. is one of India's leading and fastest-growing private sector financial services companies providing Consumer Finance, Housing Finance, Commercial Loans, Asset Management, and Advisory services.

About Nextbillion Technology

Nextbillion Technology is a SEBI registered Stock Broker, Depository Participant, Research Analyst, and AMFI registered Mutual Fund Distributor. It offers one of the leading digital investment platforms, 'Groww', having over 17 million customers spread across various cities in India. Nextbillion Technology is a step-down subsidiary of Groww Inc. which was founded by Lalit Keshre, Harsh Jain, Ishan Bansal, and Neeraj Singh.

Financial performance of Nextbillion Technology in the past three years

(Source: Indiabulls AMC letter to unitholders)
 

Why is Indiabulls selling its mutual fund business?

According to an earlier statement, Indiabulls Housing Finance Ltd. had decided to divest its mutual fund business to be able to consolidate capital and focus on building the company's real estate asset management business by way of Alternate Investment Fund, in line with the company's asset-light strategy. While Indiabulls Housing Finance will focus largely on retail disbursements, the AIF structure will be used for the wholesale opportunity of early-stage project finance.

What does the acquisition mean for investors in Indiabulls Mutual Fund?

On completion of the transaction, Indiabulls Mutual Fund will be renamed as 'Groww Mutual Fund'. The schemes of Indiabulls Mutual Fund will be renamed as follows:

Existing Scheme Name New Scheme Name Category AUM (Rs Crore)
Indiabulls Arbitrage Fund Groww Arbitrage Fund Arbitrage Fund 14.05
Indiabulls Bluechip Fund Groww Large Cap Fund Large Cap Fund 91.96
Indiabulls Dynamic Bond Fund Groww Dynamic Bond Fund Dynamic Bond Fund 25.97
Indiabulls Equity Hybrid Fund Groww Aggressive Hybrid Fund Aggressive Hybrid Fund 32.73
Indiabulls Liquid Fund Groww Liquid Fund Liquid Fund 198.01
Indiabulls Nifty 50 ETF Groww Nifty 50 ETF Index Fund/ETF 16.72
Indiabulls Overnight Fund Groww Overnight Fund Overnight Fund 42.15
Indiabulls Short Term Fund Groww Short Duration Fund Short Duration Fund 25.16
Indiabulls Tax Saving Fund Groww ELSS Tax Saver Fund ELSS 36.36
Indiabulls Value Fund Groww Value Fund Value Fund 9.69
(Source: Indiabulls AMC letter to unitholders)
 

Subject to the receipt of necessary approvals, the names of Indiabulls AMC and Indiabulls Trustee Company will be changed to 'Groww Asset Management Ltd.' and 'Groww Trustee Ltd.', respectively, or such other name as may be approved by the Registrar of Companies. Consequent to the above changes, the corporate logo, corporate materials and documents will undergo changes to reflect the new names.

The schemes will continue to be governed by the Statement of Additional Information of Indiabulls Mutual Fund and their respective Scheme Information Documents, and there will be no change in any of the fundamental attributes or other terms and conditions governing the schemes as a result of the proposed transaction.

Furthermore, in accordance with the Mutual Fund regulations, the AMC will provide an exit option to unit holders. The record date will be March 10, 2023, to exit from his/ her/ its investment in the Scheme/s of Indiabulls Mutual Fund at the prevailing NAV without any exit load. The facility will be available for a period of 30 days from March 13, 2023, to April 11, 2023 (both days inclusive) (up to 3.00 p.m. on [April 11, 2023]) if they do not wish to stay invested in the Schemes upon the change in control becoming effective. The no-load exit option is not available to investments in Indiabulls Tax Savings Fund of Indiabulls Mutual Fund which have not completed the statutory lock-in period of three years.

What should investors in Indiabulls Mutual Fund do?

It is noteworthy that Indiabulls Mutual Fund's performance till now across categories has been average to below-average performers. Groww can leverage its presence in the online investment platform & solutions to scale up its mutual fund business. It is also looking to invest heavily in tech-based and organising financial awareness programs to facilitate greater participation by investors. However, a turnaround in the performance of the schemes will be vital for Groww to make a mark in the mutual fund business.

As an investor, watch out for any major changes in the investment strategy, investment objectives, or key personnel after the new management takes over. If you find that the changes do not align with your investment objectives and/or risk profile, you can consider looking for alternatives. You may also consider redeeming your units if the schemes continue to trail the benchmark and most of their respective peers over longer time frames. 


DIVYA GROVER is the co-editor for FundSelect, the flagship research service of PersonalFN. She is also the co-editor of DebtSelect. Divya is an avid reader which helps her in analysing industry trends and producing insightful articles for PersonalFN’s popular newsletter – Daily Wealth letter, read by over 1.5 lakh subscribers.

Divya joined PersonalFN in 2019 and has since then used stringent quantitative and qualitative parameters to analyse funds to provide honest and unbiased research to investors. She endeavours to enable investors to make an informed investment decision and thereby safeguard their wealth.


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