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, with record date of October 8, 2025.

Summary

ICICI Prudential Asset Management Company has received SEBI approval for the merger of ICICI Prudential CRISIL-IBX AAA Bond Financial Services Index - Dec 2026 Fund (Merging Scheme) into ICICI Prudential Corporate Bond Fund (Surviving Scheme). The merger was approved by the Board of Directors of ICICI Prudential Asset Management Company Limited 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 8, 2025.

Key Points

  • ICICI Prudential CRISIL-IBX AAA Bond Financial Services Index - Dec 2026 Fund will merge into ICICI Prudential Corporate Bond Fund
  • Record date for the merger: October 8, 2025
  • Merger effective date: November 14, 2025 (end of business hours)
  • SEBI no-objection received on September 26, 2025
  • Board approvals obtained on June 24-26, 2025
  • Merger is considered akin to change in fundamental attributes under Regulation 18(15A) of SEBI MF Regulations 1996
  • The Merging Scheme will cease to exist post-merger
  • No new scheme will emerge; no change in fundamental attributes of Surviving Scheme

Regulatory Changes

The merger follows the procedure laid out in Regulation 18(15A) of the SEBI (Mutual Funds) Regulations, 1996, which treats scheme mergers as changes in fundamental attributes requiring specific compliance procedures. SEBI’s no-objection communication dated September 26, 2025 provides regulatory approval for this consolidation.

Compliance Requirements

  • Unitholders of the Merging Scheme should refer to the notice dated September 26, 2025 published on the AMC’s website regarding the proposed merger
  • AMC must comply with Regulation 18(15A) of SEBI MF Regulations 1996 procedures for fundamental attribute changes
  • Notice-cum-Addendum issued to update Scheme Information Documents (SIDs) and Key Information Memorandums (KIMs) for both schemes

Important Dates

  • June 24, 2025: ICICI Prudential Trust Limited Board approval
  • June 26, 2025: ICICI Prudential Asset Management Company Limited Board approval
  • September 26, 2025: SEBI no-objection communication received; notice published on AMC website
  • October 8, 2025: Record date for merger
  • November 14, 2025: Merger effective date (end of business hours)

Impact Assessment

Rationale for Merger:

The merger is driven by changing market dynamics and operational challenges:

  1. Interest Rate Environment: RBI executed substantial liquidity injections and enhanced bond purchases in February 2025 to address interbank cash shortages. Subsequently, RBI reduced interest rates by cumulative 100 basis points (25 bps in February, 25 bps in April, and 50 bps in June 2025).

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

  3. AUM Challenges: The Merging Scheme experienced sustained redemptions and continuous outflows, resulting in decreased Assets Under Management (AUM). Lower AUM makes it challenging to replicate the underlying index in accordance with regulatory guidelines and tracking difference requirements.

  4. Investment Mandates: The Merging Scheme invests more than 95% in AAA-rated bonds of Financial Services Companies with securities maturing on or before December 2026 as part of the index.

Impact on Unitholders:

  • Unitholders of the Merging Scheme will automatically become unitholders of the Surviving Scheme (ICICI Prudential Corporate Bond Fund)
  • The merger is undertaken in the interest of unitholders given operational challenges
  • No change in fundamental attributes of the Surviving Scheme
  • Unitholders should review the comparative attributes of both schemes in the notice dated September 26, 2025

Impact Justification

Scheme merger affects unitholders of target maturity debt index fund but is routine regulatory activity with SEBI approval. Limited broader market impact as it involves specific mutual fund scheme consolidation.