LIC which took over the poorly managed IDBI Bank is trying to raise money by selling of the assets of Idbi bank. One of the assets that it is trying to sell is its assets management business – the Amc.

Idbi mutual fund has about Rs. 9000 crores and somebody will pay Rs. 500 crores to buy this. Well this is the theory, and Icici Securities is going to hawk this transaction. Well good luck to them – they are reportedly expecting Rs 450-550 crs. Well, well.

If I am say a Hdfc Mutual fund, will I pay 5% to buy Rs. 9000 crore of assets? well it would be sheer madness. If Hdfc mf decides to pay 1% more to its distributors..they can get Rs. 9000 crores over the next 5 months. Why would they pay such a huge premium? Ditto for Franklin Templeton, Aditya Birla, even DSP.

However, there are some fund houses which are run by employees. They do not really care about the shareholder. With falling TER it is surely not worth paying 5% but I can think of many Mutual funds happy to pay 5% (its Board will happily support such a hair brained scheme). Which are such mutual funds? (sheer irresponsible speculation) -India Bulls, Invesco,  LnT Mutual fund, Pramerica, Yes Bank – it makes sense to justify setting up a bigger team. Yes, it will look expensive – but it will be justified by the team costs. Not sure if any of these would bite, but I cannot imagine people like Sundaram or even Sriram will not even think of buying it – but who knows?

I don’t think it is easy for Icici securities to find a new buyer…..

If I were LIC I would have just merged the 2 asset management companies – and sold off the life insurance business of Idbi.

However, we give up ….

What should you do if you are a unit holder what should you do?

If you can exit, you should exit. If you are in an ELSS scheme..you are stuck. If you are worried about the Capital gains tax don’t bother….you will have profits elswhere to be setoff, so relax.