ICICI Securities wants to delist. Why are mutual funds buying its shares?

livemint.com:

₹21 a share. In such situations, buying the shares of ICICI Securities would have been justified, as the funds can lock in a risk-free rate of return by implementing "special situation strategies", said U.R. Bhat, co-founder of Alphaniti Fintech and a former director of JP Morgan India.

In other words, this means that the funds buy the target company - ICICI Securities in this case - and sell the acquiring company – ICICI Bank -to pocket the risk free spread of ₹21 without any tax implication for the fund. However, this spread was negative in February, closing the opportunity of profiting from arbitrage. The mutual funds that bought into ICICI Securities in February include UTI Banking and Financial Services Fund, Kotak ELSS Tax Saver Scheme, Kotak Multicap Fund, Axis Quant Fund, UTI Balanced Advantage Fund, ITI Banking and Financial Services Fund, Kotak Banking & Financial Services Fund and ITI Value Fund.

These funds collectively bought almost a million shares among them, worth just over ₹75 crore as of 29 February. Interestingly, these funds had no exposure to ICICI Securities before February. Most of them also have a significant exposure to ICICI Bank shares.

Data for share purchases in March is unavailable as yet, to see if the funds are still buying into ICICI Securities. Broadly, mutual funds were net sellers of ICICI Securities in December and January. Mint sought comments from these funds on their rationale for buying ICICI Securities shares and how they plan to vote on the delisting proposal.

UTI Mutual Fund, Kotak Mutual Fund and Axis Mutual Fund declined to comment. ITI Mutual Fund did not respond to Mint's queries. In June 2023, ICICI Securities proposed to delist from the public markets and become a 100%