HDFC Mutual Fund: Aditya Birla SL, HDFC Mutual Fund will merge FMPs into debt funds

Aditya Birla Sun Life Mutual Fund and HDFC Mutual Fund will merge their Fixed Maturity Plans (FMP) – fixed term debt products – maturing in April and May into their existing open-ended fixed income schemes.

The move will be more tax-efficient for investors who don’t need investment proceeds immediately, the investment advisers said.

Aditya Birla Sun Life Mutual Fund has announced that it will merge 17 FMPs with total assets under management of ₹4,000 crore maturing between April 15 and May 23 into Aditya Birla Sun Life Low Duration Fund and Aditya Birla Sun Life Nifty SDL April 2027.

HDFC Mutual Fund plans to merge five FMPs with around ₹1,100 crore AUM into HDFC Corporate Bond Fund.

“In a rising interest rate scenario, investors looking for an alternative to reinvest their FMP products get a ready-made solution, with liquidity and efficient taxation,” said A Balasubramanian, CEO, Aditya Birla Sun Life Mutual Fund.

In a notice to investors, HDFC Mutual Fund said: “The merger will help investors in the Merging Schemes continue to invest in a portfolio of high quality corporate bonds.”

Financial planners said investors looking to reinvest their corpus in these FMPs in other fixed-income products could consider the merger.

“The portfolios of HDFC Corporate Bond and ABSL Low Duration are of high quality. Investors who have no cash requirements and can wait at least 1-3 years can consider merging with these programs,” said Viral Bhatt, Founder of Money Mantra. .

He said the merger would be more tax-efficient because investors wouldn’t have to pay capital gains at maturity. They can continue to enjoy the benefits of indexing until such time as they choose to stay invested. Furthermore, unitholders are free to choose their redemption date at any time after the merger.

“If you invested to achieve a goal in a few months, you don’t need to take action. The money will come back to your account,” said Amol Joshi, founder of Plan Rupee.

Some financial planners have said that investors in these FMPs must be selective when agreeing to the merger.

“Investors, who had the option of merging with ABSL Nifty SDL April 2027 Index Fund should reconsider their time horizon,” said Roshni Nayak, founder of Goalbridge, an investment advisory firm. Nayak said that since it is a five-year product, interest rate volatility will be higher if the investments are not held to maturity.

Dolores W. Simon