The Securities and Exchange Board of India(SEBI) could give a green signal to former Flipkart promoter Sachin Bansal's acquisition of Essel Mutual Fund as per amended and relaxed regulations for sponsoring a mutual fund as Bansal moves to expand his presence in the financial services business.
Sachin Bansal's companies, Chaitanya India Fin Credit Private Limited, a non-banking finance company (NBFC) which he had acquired in September 2019 and BAC Acquisition Private Limited (now NAVI Technologies) had moved to acquire Essel Mutual Fund in 2019 awaiting approvals.
In October 2019, Competition Commission of India had given its nod to the acquisition.
If SEBI agrees to Sachin Bansal’s purchase, it could be the first such instance where a company will be allowed to become a sponsor as per new regulations that have been relaxed lately by the premier markets regulator.
The new regulations by SEBI have done away with a mandate five years of profitable business and a net worth of Rs 50 crore for sponsoring a mutual fund - as was the case earlier.
As per the new regulations, the sponsor must maintain Rs 100 crore of net worth without having a need to maintain a profitability track in the past.
As per a SEBI press release, "To facilitate innovation and enhanced reach to more investors at a faster pace including tech-enabled solutions, sponsors that are not fulfilling profitability criteria at the time of making application, shall also be considered eligible to sponsor a mutual fund subject to having a net worth of not less than Rs 100 crore. For the purpose of contribution towards the net worth of the Asset Management Company (AMC). This net worth of the AMC has to be maintained till the time AMC makes profit for five consecutive years."
This criteria is helpful to BAC Acquisition (now NAVI Technologies) and Chaitanya India as both companies do not have five years of profitable balance sheet.
The company, NAVI Technologies in this case, has to maintain net worth of Rs 100 crore for next five years consecutively as per the new regulations.
Sonam Chandwani, Managing Director, K S Legal and Associates told Moneycontrol, "For an easy entry to fintech companies in the MF industry, the alterations in the regulations were imperative which otherwise was a nightmare given the strict regulatory confirmations of fund management along with keeping the profitability track record. Herein MFs can streamline the manner in which they compute their net-worth and SEBI wants them to maintain the requirements on a continuous basis".
NAVI Technologies has declined to comment on the story.
A source close to development told Moneycontrol, "Once SEBI notifies the board’s resolution then the regulator may issue in-principle approval to Sachin Bansal's company for acquiring Essel Mutual Fund."
SEBI has now sought an approval from the Reserve Bank of India as Chaitanya India Fin Credit is a Non-Banking Finance Company (NBFC) that makes the parent regulator’s nod necessary for commencing Mutual Fund business.
Sachin Bansal sold his 5.5% stake in Flipkart to Walmart for around Rs 6,700 crore in 2018.Bansal is also reportedly looking to buy out Aviva from its Dabur-Aviva JV for a sum estimated in the range of Rs 1,000-Rs 2,000 crore.