MF industry to see more bailout acquisitions in coming days

>> Sunday, November 9, 2008

Reeling under the liquidity pressure, the mutual fund industry could see more bailout deals -- similar to the takeover of Lotus India Asset Management -- in the coming days, say industry experts.
"One or two more such kind of transactions may be seen in days ahead but that will mainly be for bailing out some problem-ridden fund houses," MF tracking firm Value Research CEO Dhirendra Kumar said.
Value Research chief Kumar said, "The outlook for the mutual funds industry remains grim for the next two years and fixed income plans would come under pressure. The days ahead will also see mutual funds reinventing themselves to be more focussed on retail investors."
Mutual fund industry has been under pressure for last two quarters and both the Reserve Bank and the Finance Ministry are ceased of the liquidity problem faced by the industry.

In order to provide liquidity to the cash-starved industry RBI last month opened a special repo window for the banks aggregating Rs 20,000 crore for on-lending to the industry.

The lackluster response from banks to pick up funds from this window forced the RBI to extend the window the limit is exhausted.
Further reading Economic Times. Mergers and Accuasion