ICICI Bank getting more involved in MF joint venture

ICICI Bank, the 51 per cent owner of the asset management company that operates the joint venture PruICICI Mutual Fund, is getting more involved in the affairs at the fund, especially at the operational level.

Prudenial PLC of the UK owns the remaining 49 per cent.

Market sources said the bank is directly getting invoved because any problem surfacing in the fund would have a direct bearing on the parent bank, now that the AMC is a subsidiary.

Additionally, the bank may have to bear direct responsibiliy for the actions of the AMC. Earlier ICICI Bank held a 45 per stake in the asset management company (AMC).

But now that the AMC has become the bank's subsidiary, and the bank has upped its presence on the AMC board from two to three, the bank is taking a hard look at the affairs of the fund.

ICICI Bank's chief financial officer N S Kannan, who is also on the board of the AMC, is expected to play a larger role in the running of the mutual fund, perhaps even at the operational level, in parallel with the existing management but with some superior powers.

Kanan is expected to have the final say in the finalisation of the AMC's accounts for the year just ended, sources said.

Kannan when contacted said, "Our takng a greater interest in the subsidiary is inevitable since we are now majority owners." He however denied that he was taking charge at the AMC, saying that this was only a rumour.

An ICICI Bank spokesperson denied any move to induct Madhabi Puri Buch, currently head of the corporate brand at ICICI Bank, into the management of the AMC. PruICICI MF officials said that it was up to the parent bank to make comments on this.

Prudential, the foreign partner, is reported to be keen on the domestic partner taking a more active interest in the operations of the mutual fund and, according to sources, the entire shareholding pattern has been changed to facilitate ICICI Bank CEO KV Kamath's appointment to the AMC board.

Under the Reserve Bank of India norms, a bank director cannot be appointed to the board of a non-subsidiary. ICICI Bank's spokesperson, deputy managing director Kalpana Morparia, said this move would help to consolidate the accounts of the AMC in the accounts of the parent bank and thus enhance value for its shareholders.

The mutual fund had come under a cloud last year when its branch at Kanpur was found to be switching the investments made by a provident fund trust into its equity schemes in violation of norms.

While the AMC initiated damage control by voluntarily admitting to a systems failure and submitting the required information to the Securities and Exchange Board of India, it created considerable bad press for the fund house.