PSBs now plan dilution of stake in MF arms to raise funds

Published On: 11, Dec 2017 | Source:

Moneycontrol News @moneycontrolcom

Public sector banks (PSBs) are looking to raise funds by diluting stakes in their mutual funds arms via initial public offerings (IPOs). The government had directed banks to sell non-core assets to make up for any shortfall in capital post the Rs 2.11 lakh crore recapitalisation package.

According to a Hindu Businessline report, there are seven PSB-sponsored mutual funds. They are Baroda Pioneer Mutual Fund, BOI Axa Mutual Fund, Canara Robeco Mutual Fund, IDBI Mutual Fund, SBI Mutual Fund, Union Mutual Fund and Principal (Punjab National Bank) Mutual Fund.

Few of these mutual funds are already said to have started the ground work for IPOs.

The assets under management (AUM) of these seven mutual funds were at Rs 2.34 lakh crore, up by about 11 percent in the September quarter as opposed to Rs 2.10 lakh crore in the June quarter.

Aside from the government's demand to raise capital, the IPOs stem from the good response received by Reliance Mutual Fund’s public offering, which saw the company raise Rs 1,540 crore. The offer was subscribed 81.54 times, receiving bids close to Rs 88,023 crore.

Last month, taking cues from the healthy capital markets,the board of HDFC Asset Management Company, the sponsor of HDFC Mutual Fund cleared a proposal to initiate the process for filing of its initial public offering.

The report quoted NS Venkatesh, CEO, Association of Mutual Funds in India, as saying it made sense for PSB-owned mutual funds to tap the IPO market or make private placements of their holdings, as ownership is distributed among general public investors.