Description

Edelweiss Mutual Fund announces merger of CRISIL PSU Plus SDL 50:50 Oct 2025 Index Fund into Banking and PSU Debt Fund, effective October 31, 2025, with consent period from September 30 to October 29, 2025.

Summary

Edelweiss Trusteeship Company Limited has approved the merger of Edelweiss CRISIL PSU Plus SDL 50:50 Oct 2025 Index Fund (target maturity index fund) with Edelweiss Banking and PSU Debt Fund (open-ended debt scheme). The merger will be effective on October 31, 2025, coinciding with the maturity date of the merging scheme. Unitholders can provide consent or opt for exit during the period from September 30, 2025 to October 29, 2025.

Key Points

  • Merging Scheme: Edelweiss CRISIL PSU Plus SDL 50:50 Oct 2025 Index Fund (open-ended target maturity index fund investing in CRISIL [IBX] 50:50 PSU + SDL Index)
  • Transferee Scheme: Edelweiss Banking and PSU Debt Fund (open-ended debt scheme investing in debt instruments of banks, PSUs, public financial institutions and municipal bonds)
  • Effective Date: October 31, 2025 (or next business day if declared non-business day)
  • Consent/Exit Option Period: September 30, 2025 to October 29, 2025 (both days inclusive)
  • Credit Quality Enhancement: Transferee scheme has ~78% exposure to AAA-rated CPSE bonds and AAA-rated banks, with remaining in government bonds
  • Tax Efficiency: Under Section 47(xviii) of Income-tax Act, 1961, allotment of units in transferee scheme will not be considered as redemption and will not result in capital gain/loss for continuing unitholders

Rationale for Merger

Credit Quality: Comparable credit quality with merging scheme having ~50% in AAA-rated CPSE bonds and 50% in State Development Loans, while transferee scheme offers higher AAA-rated exposure (~78%) in CPSE and bank bonds with remaining in government bonds.

Asset Allocation: Investors will get exposure to similar high-quality debt instruments including AAA-rated CPSE bonds, AAA-rated bank bonds and sovereign bonds.

Liquidity Risk Mitigation: Transferee scheme offers superior liquidity due to exposure to more liquid CPSE bonds and liquid government bonds.

Reinvestment Risk Mitigation: Eliminates reinvestment risk associated with target maturity funds by moving to open-ended scheme without fixed maturity date.

Active Management Benefits: Active duration management based on market conditions, exposure to AAA-rated liquid instruments, and periodic rebalancing provides long-term benefits.

Diversification Benefits: Portfolio diversified across AAA-rated CPSE and bank bonds, multiple maturity buckets, and different CPSE segments.

Compliance Requirements

  • Unitholders must provide consent or exercise exit option during the specified consent period (September 30 to October 29, 2025)
  • This notice serves as addendum to the Scheme Information Document (SID) and Key Information Memorandum (KIM) of Edelweiss Mutual Fund schemes
  • Unitholders who do not exercise exit option will automatically receive units of the transferee scheme

Important Dates

  • Consent/Exit Option Period Start: September 30, 2025 (Tuesday)
  • Consent/Exit Option Period End: October 29, 2025 (Wednesday)
  • Effective Merger Date: October 31, 2025 (or next business day)
  • Maturity Date of Merging Scheme: October 31, 2025

Impact Assessment

For Unitholders: Investors in the merging scheme will transition from a target maturity index fund to an actively managed open-ended debt fund. This provides enhanced liquidity, eliminates reinvestment risk, and maintains tax efficiency for those who consent to the merger. Exit option is available for unitholders who prefer not to continue.

Portfolio Impact: Shift from 50:50 PSU bonds and SDL allocation to more diversified portfolio with ~78% in AAA-rated CPSE and bank bonds, offering potentially better credit quality and liquidity.

Tax Implications: No immediate tax liability for unitholders consenting to merger as per Section 47(xviii) of Income-tax Act, 1961, maintaining cost of acquisition and holding period for transferred units.

Impact Justification

Affects investors in specific Edelweiss mutual fund schemes with target maturity fund being merged into open-ended debt fund, providing exit options and continuity for unitholders