Description

Kotak Mahindra AMC announces the merger of Kotak FMP Series 292 (merging scheme) into Kotak CRISIL-IBX Financial Services 9 to 12 Months Debt Index Fund (surviving scheme) under SEBI Mutual Funds Regulations, constituting a change in fundamental attributes.

Summary

Kotak Mahindra Asset Management Company Limited (KMAMC) and Kotak Mahindra Trustee Company Limited (KMTC) have approved the merger of Kotak FMP Series 292 (Merging Scheme) into Kotak CRISIL-IBX Financial Services 9 to 12 Months Debt Index Fund (Surviving Scheme). This merger is being carried out under Regulation 25(26) of the SEBI (Mutual Funds) Regulations, 2026 and constitutes a change in the fundamental attributes of the merging scheme. SEBI’s comments were obtained prior to effecting the change, as required under SEBI Master Circular No. SEBI/HO/24/13/11(1)2026-IMD-POD-1/I/7602/2026 dated March 20, 2026.

Key Points

  • Merging Scheme: Kotak FMP Series 292 — a close-ended debt scheme with a maturity of 1,735 days; relatively high interest rate risk and relatively low credit risk
  • Surviving Scheme: Kotak CRISIL-IBX Financial Services 9 to 12 Months Debt Index Fund — an open-ended Constant Maturity Index Fund tracking the CRISIL-IBX Financial Services 9–12 Months Debt Index; relatively low interest rate risk
  • The merger tantamounts to a change in fundamental attributes under SEBI MF Regulations 2026
  • Trustees have considered SEBI’s comments prior to effecting the change
  • The surviving scheme is an index fund with portfolio rebalancing aligned to the underlying CRISIL-IBX index

Regulatory Changes

  • Merger executed under Regulation 25(26) of SEBI (Mutual Funds) Regulations, 2026
  • Change in fundamental attributes triggered, requiring mandatory exit option for unitholders of the merging scheme
  • Reference circular: SEBI Master Circular No. SEBI/HO/24/13/11(1)2026-IMD-POD-1/I/7602/2026 dated March 20, 2026 (para 1.9.2)

Compliance Requirements

  • Investment restrictions of surviving scheme:
    • Total exposure to any single group (excluding PSUs, PFIs, PSBs) shall not exceed 25% of NAV
    • Total exposure to a particular sector (excluding G-sec, T-bills, SDLs, and AAA-rated PSU/PFI/PSB securities) shall not exceed 25% of NAV — though this provision is not applicable as the scheme is based on a sectoral debt index
    • Exposure to instruments with unsupported ratings below investment grade limited; supported-rated instruments above investment grade capped
    • Debt instrument exposure to a particular group shall not exceed 10% of the debt portfolio; group sub-limit is 5%
    • The scheme shall NOT invest in debt instruments issued by Tourism companies, Airlines companies, or Gems and Jewellery companies
    • The scheme shall NOT undertake securities lending, short selling, ADR/GDR, foreign securities, or Credit Default Swaps
  • Macaulay Duration: Portfolio duration must replicate the underlying index duration within a maximum permissible deviation of +/- 10%
  • Portfolio rebalancing must align with the CRISIL-IBX Financial Services 9–12 Months Debt Index

Important Dates

  • Notice Date: May 6, 2026
  • Effective merger date: Not explicitly stated in the extracted content; unitholders should refer to the full circular/addendum for the record date and exit window period

Impact Assessment

  • Unitholders of Kotak FMP Series 292 face a significant structural change: their investment moves from a close-ended fixed maturity plan (1,735-day tenure, higher interest rate risk) to an open-ended constant maturity index fund (lower interest rate risk, ongoing liquidity)
  • Unitholders are entitled to exit without load during the exit window triggered by the fundamental attribute change
  • The surviving scheme tracks a specific sectoral debt index (CRISIL-IBX Financial Services 9–12 Months), meaning continued investors will have exposure to financial sector debt instruments with 9–12 month maturities
  • The change in structure from close-ended to open-ended improves liquidity for investors who remain
  • Investors with a preference for fixed-tenor, higher-yield FMP structures may find the surviving scheme’s index-linked, sector-concentrated mandate unsuitable and should evaluate the exit option carefully

Impact Justification

Scheme merger constitutes a fundamental attribute change under SEBI MF Regulations 2026, directly affecting unitholders of Kotak FMP Series 292 who must decide whether to continue or exit; triggers exit option rights and significant portfolio restructuring from a close-ended FMP to an open-ended index fund.