Description

SEBI-approved merger of ICICI Prudential CRISIL-IBX AAA Bond Financial Services Index - Dec 2026 Fund into ICICI Prudential Corporate Bond Fund, effective November 14, 2025.

Summary

ICICI Prudential Asset Management Company Limited has announced the merger of ICICI Prudential CRISIL-IBX AAA Bond Financial Services Index - Dec 2026 Fund (Merging Scheme) with ICICI Prudential Corporate Bond Fund (Surviving Scheme). The merger was approved by the Board of Directors on June 26, 2025 and ICICI Prudential Trust Limited on June 24, 2025. SEBI communicated its no-objection on September 26, 2025. The merger will be effective from end of business hours on November 14, 2025, with a record date of October 08, 2025.

Key Points

  • Merging Scheme: ICICI Prudential CRISIL-IBX AAA Bond Financial Services Index -Dec 2026 Fund (open-ended target maturity index fund)
  • Surviving Scheme: ICICI Prudential Corporate Bond Fund
  • SEBI no-objection received on September 26, 2025
  • Merger treated as change in fundamental attributes under Regulation 18(15A) of SEBI (Mutual Funds) Regulations, 1996
  • Post-merger, the Merging Scheme will cease to exist
  • No new scheme will emerge; no change in fundamental attributes of Surviving Scheme
  • Merging Scheme mandate: invest >95% in AAA rated bonds of Financial Services Companies
  • Surviving Scheme: flexibility to invest across various debt and money market instruments including bonds and debentures

Regulatory Changes

The merger follows the procedure laid out in Regulation 18(15A) of the SEBI (Mutual Funds) Regulations, 1996, which governs changes in fundamental attributes of a scheme. SEBI has provided regulatory approval for this merger.

Compliance Requirements

  • Unitholders of the Merging Scheme should refer to the notice dated September 26, 2025 published on AMC’s website
  • The merger is considered akin to change in fundamental attributes requiring compliance with MF Regulations
  • Unitholders need to be aware of the transition from the target maturity index fund to the corporate bond fund structure

Important Dates

  • Board of Directors approval: June 26, 2025
  • ICICI Prudential Trust Limited approval: June 24, 2025
  • SEBI no-objection communication: September 26, 2025
  • Record date: October 08, 2025
  • Merger effective date: November 14, 2025 (end of business hours)

Impact Assessment

Rationale for Merger:

The merger is driven by significant changes in the interest rate environment and liquidity conditions:

  1. Interest Rate Cuts: RBI reduced rates by cumulative 100 bps in 6 months (25 bps in February 2025, 25 bps in April 2025, and 50 bps in June 2025)

  2. Liquidity Measures: In February 2025, RBI executed substantial liquidity injection and enhanced bond purchases to address interbank cash shortages

  3. Market Impact: Interest rate cuts and liquidity injections pushed bond yields lower, leading to limited investor interest in Debt Index Funds

  4. Operational Challenges:

    • Sustained redemptions from the Merging Scheme
    • Continuous outflows and decreasing AUM
    • Lower AUM making it challenging to replicate the underlying index
    • Difficulty in maintaining tracking difference requirements per regulatory guidelines

Impact on Unitholders:

  • Unitholders will transition from a target maturity index fund (focused on AAA Financial Services bonds maturing by December 2026) to a broader corporate bond fund with diversified investment mandate
  • The Surviving Scheme offers greater flexibility in asset allocation across debt and money market instruments
  • Merger is positioned as being in the interest of unitholders given operational constraints of the Merging Scheme

Impact Justification

Affects unitholders of ICICI Prudential debt funds. Merger approved by SEBI due to declining AUM and operational challenges in the merging scheme. Limited broader market impact but significant for fund investors.