Shriram Amc Plans Rights Issue To Hike Equity Base

Though the suggestions in the report has been passed by the Sebi board, the new norms are yet to be notified.

At present, SAMC is the only one in India to be traded as a listed security. It had come out with a public issue of Rs 1.5 crore priced at par in November 1995.

The stock is presently listed in the Bombay Stock Exchange and the Madras Stock Exchange.

Senior AMC officials told Business Standard yesterday that the present paid-up equity capital of the AMC is Rs 6 crore, and in order to fall in line with the Sebi regulations, the company is planning to come out with a 1:1 rights issue of Rs 4 crore, of which shareholders would be bringing in a sum of Rs 1 crore.

 

However, mutual fund observers feel that Shriram AMC's plan to tap the market in the near future would not go

down well with the mutual fund industry.

While conceding that several US-based large asset management companies are being listed and actively traded in the overseas markets, they feel in the current Indian context the concept of having publicly held AMCs would come a cropper.

The only regular income of AMCs, according to Sebi (Mutual Funds) regulations 1993 is investment management and advisory fees. Since majority of AMCs manage less than Rs 100 crore, according to the regulations, the maximum fee charged by any AMC would be one and a quarter of one per cent of the weekly average net assets outstanding in each accounting year for the scheme concerned.

Even this fee structure would be changed shortly and according to the NAV committee report, the new slab would be .80 per cent of net assets in place of the existing 1.25 per cent.

Industry sources said, As it is a majority of close-ended schemeshave their net asset values (NAVs) being quoted at a discount to their issued price. This automatically means that the AMC is actually earning 1.25 per cent of the diminished assets.

When the new fee structure comes into force the AMC fees would be decreased further and the shareholders of SAMC would naturally stand to lose, sources feel. Under these circumstances the proposed rights issue would create further woes for the shareholder, they added.

The whole situation may, however, be reversed once the Indian mutual fund industry revives. Once the Mutual Fund 2000 report is notified, AMCs would be allowed to undertake portfolio management services, management of offshore funds, providing advisory services to offshore funds and also management of pension funds or provident funds and venture capital funds./center>