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First India Gets Sahara

With its acquisition of First India, Sahara India makes its foray into mutual fund business. For investors in First India Mutual Fund, it's surely a step forward, as they can now take a long-term stand

This is a first for Sahara India. This company—which is one of India's largest non-banking finance companies (NBFCs) -- is all set to make its entry into the mutual fund business. Sahara India Financial Corporation Ltd (SIFCL) has finally got the approval from SEBI to acquire the entire shareholding in First India Asset Management Private Ltd (FIAM)

As a result of the sponsor of First India Mutual Fund, the name of the AMC, its investment manager and of the schemes may undergo a change.

First India asset management company (AMC) currently manages six funds—one equity fund, four debt funds and a closed-end tax-planning fund – with assets under management of Rs 232 crore as on October 31, 2003. Although this AMC came into being way back in 1996, it has remained an underdog so far. Till 2002, it just had one product—a closed-end tax-planning fund. This fund house got its act together only in 2002, when it launched five new schemes. However, these funds failed to attract investors' attention and mobilised very little capital in the IPOs.

With Sahara picking up First India, things should look up for this small-time AMC. The equity capital of the fund house is likely to increase from Rs 10 crore to Rs 50 crore. This takeover will also enable First India to expand its business as Sahara has 1,707 establishments in the country, compared to First India's five centres. That apart, Sahara also has a large depositor base of 5.1 crore people.

Over and above all this, this acquisition will build investors' confidence in the fund as they can now take a long-term stand on this scheme owing to the AMC's ability to withstand any unfortunate event. Basically, this new development means that we will see much more activity from this small fund house in the future. It sure is a step forward.