Employees of IDBI AMC oppose merger with LIC Mutual Fund

Some employees of IDBI Asset Management Co. (AMC) have objected to the merger of the AMC with LIC Mutual Fund.

LIC completed the takeover of IDBI Bank, the sponsor of IDBI Mutual Fund, in January 2019. However, LIC has its own asset management company, LIC Mutual Fund. under the Securities and Exchange Board of India (Sebi) rules, a single entity cannot be the sponsor of multiple asset management companies, and thus a sale or a merger is necessary in this case.

However, the merger plans do not envisage the transfer of the 130 employees on the rolls of IDBI AMC to LIC Mutual Fund, the employees pointed out in a letter to the Prime Minister’s Office (PMO), IDBI’s board, the Sebi chairman and the finance ministry. Mint has seen a copy of the letter, which raised the possibility of legal action if the demands of the employees are not met.

A separate document prepared by the employees highlighted that IDBI AMC is a profitable concern and is being merged with a loss-making asset management company. “Common sense would suggest that IDBI AMC should have taken over LIC AMC and not the other way round as the parent would remain the same. Also, there is a lot of interest in the asset management business from players who have been keen to set up their AMC business. So for AMC’s such as IDBI AMC, open market sourcing would have given the exchequer higher valuation,” the document said. A previous attempt to sell IDBI AMC to Muthoot Finance failed because of objections by the Reserve Bank of India. IDBI AMC had average assets under management (AUM) of ₹4,120 crore for the quarter ended March, whereas LIC AMC had ₹16,927 crore, according to data on the website of the Association of Mutual Funds in India.

A Sebi circular in December 2020 effectively allowed fintechs to enter the asset management space by relaxing profitability conditions. A host of fintechs have since entered the mutual fund industry. These include Navi Mutual Fund and Groww, a mutual fund investment platform that acquired Indiabulls Mutual Fund in May 2021. In August, discount brokerage Zerodha got approval to launch a mutual fund.