ICICI Pru Mutual Fund has announced that its Board and Trustees have approved the merger of five Fixed Maturity Plans (FMPs) into ICICI Prudential Money Market Fund.
The merger plans are ICICI Prudential FMP Series 84-1272 Days Plan Q, ICICI Prudential FMP Series 84-1279 Days Plan P, ICICI Prudential FMP Series 84-1288 Days Plan O, ICICI Prudential FMP Series 84-1254 Days Plan U and ICICI Prudential FMP Series 84 – 1247 Days Plan W.
The effective date of merger will be the maturity date of each FMP, which is either May 30, 2022 or June 2/9, 2022.
Investors agreeing to the merger proposal should submit a consent form to the fund house. The agreed period is open for one month starting from April 29, 2022, till the maturity of the fund.
Unitholders who do not submit the consent form will not be deemed to have entered into a settlement with the merger and will receive the redemption proceeds on the maturity date of the FMP. Capital gains tax will be levied on maturity proceeds.
Note that there will be no impact on existing investors’ investments in ICICI Pru Money Market Fund. However, the existing investors in this fund are also given the option to exit without any exit load, within the exit option period starting from April 29, 2022 to June 09, 2022, at the applicable NAV.
The five FMPs currently have significant investments in AAA-rated corporate bonds and sovereign securities. On the other hand, money market funds, which will be merged with FMPs, have performed well in money market instruments such as commercial papers and certificates of deposit.
“In that case, there will not be a huge difference on the credit exposure front between an existing FMP and a money market fund,” said Joydeep Sen, an independent debt market analyst. He also pointed out that investors who do not have immediate liquidity requirement can give their consent for the merger because of the tax benefits on the merger.
As per the Income Tax Act, consolidation of schemes of mutual funds does not trigger tax effect. Thus, if the funds are invested in the new scheme upon merger, there will no longer be any capital gains effect on the investor.