Mutual funds, either independently or through intermediaries, are tapping cash-rich promoters and IT companies, who are sitting on a pile of cash. A quick calculation reveals that the IPOs of Hughes Software and HCL Technologies coupled with a few takeovers have alone generated over Rs 2000-crore in the last one month.

``It's turning out to be a win-win situation for both the fund industry and the corporate sector, primarily due to the tax-free status enjoyed by mutual funds. With the fund industry now fiercely competitive, every single rupee counts and we are all vying with each other for a share in this fast-expanding, gigantic pie,'' says the marketing head of a mutual fund.

For instance, the promoters of American Remedies, which was recently taken over by Dr Reddy's Lab, have placed their kitty with a clutch of mutual funds. The promoters raked in over Rs 41 crore after selling their 45 per cent stake in the company.

``This is one source of investment which mutual funds are actively looking at,'' says Samir Arora, head of Asian emerging markets, Alliance Capital. ``These investments immediately add substantially to our assets,'' adds the head of another mutual fund.

Among other sources of investments, mutual funds are tapping information technology companies, which have recently concluded their IPOs. For instance, mutual funds are already in talks with Delhi-based Hughes Software which recently concluded its Rs 275 crore IPO. ``The company is expected to place some money with our fund shortly,'' said sources in a Mumbai-based mutual fund.

However, money from IPOs is placed only in short-term debt funds and gilt funds to avoid the high volatility in equities.

``The idea is to earn a high and tax-free return in comparison to bank deposits. Most of the IT companies have raised money for either setting up offices or acquiring companies abroad and it always takes some time for such plans to crystallise. Though for a short-term, mutual funds are best investment option to park money,'' said an analyst. ``On the risk scale, short-term debt funds are the safest investment avenue since even gilt funds will suffer losses in case of interest-rate moving up,'' added an industry source.

On the other hand, mutual funds are getting long-term investments from promoters who have sold stake in companies. ``Since promoters are booking capital gains on sale of their share, this money is typically 54EA money which means that funds will be locked in for at least three years,'' said an industry source.

Among such deals, mutual funds are chasing Crompton Greaves and DSS Enterprises which recently sold their stake in Skycell to Bharati. The amount involved here is Rs 125 crore. IndiaWorld's Rajesh Jain is another potential investor who has received Rs 500 crore (all cash) from Satyam Infoway.

However, most of the funds prefer to tap these investors through intermediaries. ``No high-ticket investor or corporate will like to place all his money with a single fund. That is why the funds approach these investors through a distributor who, in turn, advises his clients,'' said an intermediary.