Will the sell-off of four close-ended schemes of IndFund prove to be a bane or boon for the seller as well as investors?
28-May-2001 •News Desk
Indian Bank is likely to sell the existing funds managed by its subsidiary -- Indfund Management to Tata AMC. If the Indfund and Tata deal is concluded, it will be the second such deal. Earlier Birla Sunlife acquired two funds of Apple Asset Management - the Apple Goldshare and Apple Platinum Share. After the acquisition, the funds were rechristened as Birla IT and Birla MNC.
Indfund Management was set up in 1994, which floated ten closed-end funds. Of the ten, six funds have been redeemed of which three carried return assurance.
The AMC faced problem in redeeming its assured return funds. The key problem faced was a return assurance while the portfolio was equity tilted. And in the bear market since 1994, these funds witnessed massive capital erosion. The fund currently has Rs 60 crore under management in its four closed-end fund -- Ind Navratna, Ind Taxshield, Ind Shelter and Ind Sagar.
Of the four, three are closed-end tax savers. By acquiring the management of the four funds, Tata AMC will have to offer exit option to investors. All the funds have been dismal performers with massive erosion of capital for investors. As on May 23, 2001, Ind Navratna has an NAV of Rs 6.29, Ind Taxshield - Rs. 9.26, Ind Shelter - Rs. 66.38 and Ind Sagar Rs. 16.78. All the funds are to be redeemed by 2004. For some investors, the management change could be the last ray of hope. And for the rest an early exit opportunity from sticky investment.