Sebi yet to approve Sun F&C-Principal Mutual deal

Securities and Exchange Board of India (Sebi) is yet to give a formal approval to Principal Mutual Fund to acquire the schemes of Sun F&C Mutual Fund.

On Wednesday, Calcutta High Court had dismissed a suit seeking injunction on the proposed sale, thereby removing one hurdle facing the deal.

Anurag Madan, officer in charge of legal issues at Sun F&C, said the fund will take a month to transfer its schemes to Principal after receiving approval from Sebi.

The market regulator is yet to clear the deal, announced on July 1, 2003. Nikhil Khattau, CEO of Sun F&C Mutual Fund, could not be contacted as he was abroad.

Rules governing the mutual fund industry stipulate that a fund house has to give a month's notice to all unit holders informing them the schemes were being taken over. Unit holders then had to decide on whether to continue or exit.

Sanjay Sachdev, country manager, Principal Financial Group, said the fund will like to complete the proposed deal "as early as possible" once Sebi clears the deal.

Industry sources said if Khemka minors, who had moved Calcutta High Court seeking an injuction on the sale, filed an appeal before the division bench against yesterday's order, fresh complications would arise. The legal counsel of the minors indicated her clients would file an appeal.

Sun F&C suffered erosion of assets under management (AUM) and of its investors base during the legal battle. AUM of the fund came down to Rs 250 crore, from Rs 500 crore when the deal was signed.

This implies the price of the deal may also be halved as the transaction price was directly related to size of AUM, industry experts said.

Mihir and Kushal, great grandsons of the Khemka group founder Rameswar Lal, had moved Calcutta High Court asking for restriction on sale of any property and companies promoted by their family.

Sun F&C Mutual Fund was sponsored by F&C Emerging Markets and the Sun Group. Sun Securities (India) Ltd was part of the SUN Group, principally owned and controlled by members of the Khemka family.

The minors are sons of Sanjay Khemka and grandsons of Chandi Prasad. They had alleged in the suit they, along with their mother, were not staying with their father and therefore they would be denied their share in the family's assets.

However, Calcutta High Court's ruling issued Wednesday did not include other companies promoted by the Sun group.

The Khemkas were, therefore, not free to sell shares in properties and companies including Sun Securities (India), Sun Breweries CIF Ltd, Sun Interbrew Ltd, Sun Technology Ltd and several overseas firms like Indah Rubber, M R Flour Mills Pvt Ltd, Asia Impex Pvt Ltd and Khemka Instruments.