UTI AMC continues to push for IPO

By: Kartik Gupta

UTI Asset Management Co. Ltd, the country’s fifth largest mutual fund manager, has proposed an initial public offering (IPO) plan to the government to provide an exit to its four state-run sponsors—State Bank of India (SBI), Life Insurance Corp. of India (LIC), Bank of Baroda (BoB) and Punjab National Bank (PNB).

At a meeting with the government last week, the fund house proposed an IPO to divest at least 26% of the promoter stake, which will allow a partial exit of the four sponsors in equal proportion.

Another suggestion discussed at the meeting was stake sales by BoB and PNB to either LIC or SBI and a subsequent merger of UTI AMC with the entity that buys the majority stake in the company. But even BoB and PNB said they would prefer an IPO as it will allow for better price discovery.

At present, each of the four state-run sponsors holds an 18.5% stake in the paid-up capital of UTI Asset Management, while the rest is held by T. Rowe Price International Ltd.

UTI Asset Management, which managed assets worth an average Rs.1.06 trillion in the December quarter, has been toying with the idea of an IPO for the past seven years in order to provide an exit to the four sponsors, which run their own asset management businesses separately.A Securities and Exchange Board of India (Sebi) norm does not allow the sponsor of one asset management company to be associated with the sponsors or promoters of another..

SBI Mutual Fund is the sixth largest asset management company, with average assets of Rs.1 trillion for the December quarter. A merger of UTI with SBI Mutual Fund will make the latter the number one player in the Rs.13.4 trillion industry.

On the other hand, if LIC gets UTI Asset Management, LIC Mutual Fund will become the fifth largest AMC in the country. LIC is the only state-run life insurer and is the country’s largest institutional investor.According to reports, T. Rowe Price too is in favour of UTI Asset Management’s listing.

UTI Mutual Fund was carved out of the former Unit Trust of India (UTI) in February 2003.Following a parliamentary approval of The Unit Trust of India (Transfer of Undertaking & Repeal) Act, 2002, UTI was bifurcated into Specified Undertaking of Unit Trust of India (SUUTI) and UTI Asset Management. UTI Asset Management Co. had average assets under management of Rs.92,730.23 crore across its mutual fund schemes during the April-June quarter of 2015-16.