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Mega Merger - Yo! Yo! Bond Funds

RIL and RPL merger, the biggest corporate merger in India, will also benefit some bond funds in a significant way. The AA rated bonds of Reliance Petroleum is likely to be upgraded to AAA, thus benefiting bond funds holding larger positions in it. Read this to find the list of likely beneficiaries.

RIL and RPL merger, the biggest corporate merger in India was announced yesterday. As a result RPL's credit rating would shoot up, which would allow the company to refinance its debt and save some money. This will also benefit some bond funds in a significant way.

The AA rated bonds of Reliance Petroleum is likely to be upgraded to AAA, thus benefiting bond funds holding larger positions in it. As the rating of the bond goes up, the instrument becomes safer. Hence the bond prices go up. Here is the list of likely beneficiaries resulting from the mega merger.

Funds having exposure in bonds of RPL
  Schemes  % of Net Assets*
  LIC MF Children's 14.03
  Alliance MIP 13.70
  Pru ICICI FMP Y3 I 13.18
  Chola Freedom Income 12.80
  Tata Income-G 10.98
  HDFC FIP July 2001(3) 10.86
  Alliance Income Fund 10.79
  Franklin India Balanced-D 10.33
  IDBI PRINCIPAL Deposit-EA/EB 10.14
  Tata Liquid-G 9.31
  Franklin India Balanced-G 8.87
  Sun F&C MIP 7.88
  Birla MIP 7.41
  HDFC Liquid 6.34
  Grindlays SSI ST 5.22
* As on Jan 31, 2002

    Alliance Income Fund is likely to be the one of the beneficiaries of RPL's rating upgradation. According to Nikhil Johri, CIO of Alliance Capital Mutual Fund "Recently, we have been consciously moving from RIL to RPL because of the 80 basis points difference between the two. The NAV of Alliance Income is likely to go up by 5 to 6 paisa as a result of this upgrade."