Indiabulls Mutual Fund to be renamed as Groww Mutual Fund: What should you know?

The board of Indiabulls AMC has approved the sponsorship shift from Indiabulls Housing Finance Ltd. (IBHFL) to Nextbillion Technologies (NBT), the promoter of Groww (an online investment platform). The asset managers have written a letter to their investors to communicate the changes in their schemes. Does it impact Indiabulls MF investors, and what should they do? Today, we will discuss everything related to the change and these companies. 

About Indiabulls Mutual Fund

The company was incorporated in 2008. Indiabulls MF was established as a trust, with Indiabulls Housing Finance as its sponsor. The Trustee of the MF was Indiabulls Trustee Company Ltd. (ITCL). Though the MF business is small, Indiabulls Housing Finance is India's one of the leading and fastest-growing private-sector financial services companies. It provides housing finance, commercial loans, consumer finance, asset management, and advisory services.

Among AMCs, Indiabulls MF is a relatively small-sized AMC with an AUM of only Rs 508 crore (Feb 2023). As of March 2023, the fund has only ten schemes - 4 equity and debt each, and two hybrid schemes. 

About Nextbillion Technology (NBT)

The company is a SEBI-registered stock broker, research analyst, depository participant, and AMFI-registered mutual fund distributor. You may not know the company, but you will know about its digital investment platform - Groww. NBT is a step-down subsidiary of Groww. 

What is the change?

In a letter to its shareholders, the company has said that post the necessary approvals, the names of ITCL and IBAMC may be changed to Groww Trustee Limited and Groww Asset Management Limited, respectively. 

These are the names suggested as of now. The final names can be different as they have to be approved by the registrar of companies. 

After the changes are approved, the corporate materials, corporate logo, and documents will change to reflect the new names of IBMF, IBAMC, and ITCL. Indiabulls Housing Finance Limited (IBHFL) will transfer its 100% shareholding in the paid-up share capital to NBT. Also, it will transfer its entire shareholding in the paid-up share capital of ITCL to NBT. 

As a result, IBHFL will cease to be Indiabulls MF's sponsor, and NBT will become the new sponsor. Additionally, the IBHFL's nominee director will resign from the IBAMC and ITCL Board, and individuals nominated by NBT will be taken on the new board.

The Timelines

The Board of Directors of the Trustee Company and AMC approved the above change in control in their meetings held on May 10, 2021. SEBI has already provided its approval. The above change would result in a change in control within the meaning of Regulation 22(e) of the MF Regulations. 

Wondering what is it? Under this regulation, no change in control of an AMC can be made unless the unitholders are given the option to exit at the prevailing Net Asset Value (NAV) without any exit load.

Therefore, an exit option is available to unitholders as of the close of business hours on the record date is March 10, 2023, to exit from their investment in the Schemes of Indiabulls MF at the prevailing NAV without any exit load. 

Investors can exit in a period of 30 days from March 13, 2023, to April 11, 2023, up to 3.00 pm (both days included). Investors who do not want to stay invested in the Indiabulls MF schemes can exercise the exit option by April 11, 2023. 

Why is Indiabulls selling its MF business?

As per the media reports, IBHFL had decided to divest its mutual fund business to consolidate capital and focus on building the company's real estate asset management business around an Alternate Investment Fund (AIF), in line with the company's asset-light strategy. 

While IBHFL will focus mainly on retail disbursements, the AIF structure will be used for the wholesale opportunity of early-stage project finance. 

What are the different schemes under Indiabulls MF?

Below are the schemes under the Indiabulls AMC. Now, these schemes will be under Groww sponsorship. As you can see below, all the MF schemes are miniature concerning AUM. The largest AUM is of Indiabulls Liquid Fund, while the smallest AUM is of Indiabulls Value Fund.

What should investors who have invested in the above schemes do? 

As an investor, you need to look for any significant changes in the investment strategy, objectives, or key personnel after the new management takes over. If you see any major changes and they do not align with your investment objectives or risk profile, you can consider exiting the fund. 

Also, check the returns of your fund and compare them with those of its peers. If the schemes continue to trail the benchmark for a long time, it would be a good time to exit and take entry into the better-performing fund. 

Conclusion

We have mentioned above that Indiabulls AUM size is relatively small. Even if you look at their funds' performance, none of them are top-performing funds. However, with Groww on board, and its massive online presence, the schemes can scale. Investors must evaluate their exposure to these funds and their performance and decide which option is best for them (exit or continue).

This is not investment advice. Investments in the securities market are subject to market risk, read all the related documents carefully before investing. Past performance is not indicative of future returns.