Shareholders of UTI AMC to pare stake via IPO

UTI AMC, have decided to sell part of their holdings to the public through a share sale.

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Profit after tax was Rs 348 crore as of March 31 against Rs 341 crore in the previous year.
Mumbai: Shareholders of India’s oldest mutual fund house, UTI Asset Management Company (AMC), have decided to sell part of their holdings to the public through a share sale. An initial public offering (IPO) is expected in the next six months as talks with investment bankers are in the final phase, according to people aware of the development. The move comes after the Securities and Exchange Board of India (Sebi) directed the fund house to comply with crossholding rules.

UTI AMC, promoted by four domestic shareholders including Life Insurance Corporation of India (LIC), is expected to get valued at Rs 12,000-13,000 crore. The IPO size will be in the range of Rs 2,500-3,000 crore, said one of the persons.

In March 2018, Sebi had introduced crossholding limits in mutual funds to eliminate potential conflicts of interest. It mandated that if a shareholder has at least a 10 per cent interest in a mutual fund, it cannot hold a similar-sized stake in another fund house and would also have to give up its board positions.

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UTI’s four domestic shareholders — LIC, State Bank of India (SBI), Punjab National Bank (PNB) and Bank of Baroda (BoB) — hold 18.5 per cent stake each and also have their own AMCs. Hence the crossholding rule applies to all the four. US asset manager T Rowe Price holds the remaining 26 per cent stake.

“Documentation work will start once the investment bankers are appointed. The valuation and the IPO size will be finalised subsequently,” said another person familiar with the development. “The bankers will be appointed in the next couple of weeks while the IPO is likely to be launched by March-April 2020.”

UTI’s four domestic shareholders had to pare their stakes to less than 10 per cent each by March 2019. But they couldn’t do so as the fund house didn’t have a chief executive. “There has been no progress on that front (appointment of a CEO),” said another person with knowledge of the matter. “We can’t wait endlessly for that to happen. It has been decided to proceed with the IPO.”
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The regulator had also written to UTI asking what steps it has taken to comply with the rules. “The articles of association of UTI and shareholders agreement will have to be changed,” said a third person. “None of the shareholders will be identified as a promoter.” UTI and its five shareholders didn’t respond to queries.

UTI came into existence in 1964 through an act of Parliament. Its first scheme was US-64. In 2003, when US-64 collapsed, UTI was split into the Specified Undertaking of the Unit Trust of India (SUUTI) and UTI AMC. The net asset value-based schemes were shifted to UTI AMC, while large equity holdings and other assets including real estate and 25 assured-return schemes went to SUUTI. As of March 31, UTI Mutual Fund had 195 schemes in operation with average assets under management (AUM) at Rs 1.5 lakh crore.

UTI AMC with 150 branches and over 10 million investor accounts has four subsidiaries — UTI Venture Fund Management, UTI International, UTI Retirement Solutions and UTI Capital. Its net worth as of March 31 was Rs 2,408 crore, up from Rs 2,173 crore in the previous year. Profit after tax was Rs 348 crore as of March 31 against Rs 341 crore in the previous year.

If UTI’s IPO materialises, then it will be the third AMC to be listed on the bourses behind Reliance Nippon Life AMC and HDFC AMC.
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