T Rowe moves Bombay HC seeking extension of Puri's tenure as UTI MF head

US-based asset manager said lack of timely action from Indian authorities, while 'conflicted' shareholders ignore directions of UTI Trustee Board, reason to move court

The tussle between the shareholders of UTI Asset Management Company has taken a legal twist. US-based T Rowe Price has moved the Bombay High Court (HC) seeking an extension of tenure for Leo Puri, managing director of the fund house. 

Puri’s five-year term is set to end next week, amid disagreement between T Rowe Price and the four state-owned stakeholders on whether he should continue at the helm. In a writ petition filed on Wednesday, T Rowe has sought an extension for Puri to prepare for the AMC’s IPO. 

Further, the global asset manager, in the petition, has said the four public sector undertakings (PSUs) should dilute their individual stakes to below 10 per cent in order to comply with the crossholding norms.

In a detailed response to Business Standard, T Rowe Price shared various issues plaguing UTI MF. 

Spokesperson Edward Giltenan said: “We are simply asking the court to instruct Sebi and the Ministry of Finance to fulfill their supervisory responsibilities by directing the other UTI shareholders and their nominee directors to comply with regulations, the law and, more specifically, the directions of the UTI Trustee Board, all of which they have ignored.”

“We want the UTI AMC Board to follow the direction of the Trustee Board and extend the contract of the managing director (Puri) to prepare for the long-planned IPO, and certain other governance matters,” he added.

The spokesperson added the firm is unhappy with the way Indian authorities handled this issue, and is taking this step to prevent further harm to UTI.  

“This lack of timely action by the Indian authorities, and the willful disregard for the law and regulations by the conflicted UTI shareholders and the supposedly independent directors, is jeopardising UTI while also sending a very negative message to foreign investors about India’s attractiveness as an investment destination,” Giltenan said. 

T Rowe, which is the only private sector shareholder in UTI MF, pointed out its disappointment with other shareholders of UTI MF, who have led to deterioration of corporate governance standards at the fund house. 

“The UTI AMC directors nominated by certain conflicted shareholders have gone well outside the bounds of good governance and essentially taken control of the UTI AMC Board, including defying the lawfully binding direction of the independent mutual fund Trustee Board. In doing so, they have created conditions that prevent timely compliance with the Sebi regulation, requiring each of them to sell below 10 per cent.”

Giltenan shared how this interference is playing out: “Two Indian sponsors have asked Sebi for an extension (on cross-holding norms) and certain conflicted board members have begun acting as a block, disrupting board governance and seeking to create a gap in leadership, apparently to delay progress toward selling down their stakes.”

Sebi regulations stipulate that no sponsor of an MF can own 10% or more of any other mutual fund or have representation on the board of the asset management company or the trustee company of any other mutual fund — and must be in compliance with this regulation by March 31, 2019.

At present, T Rowe Price owns 26 per cent stake, while LIC, SBI, PNB and Bank of Baroda hold 18.25 per cent each. Giltenan said T Rowe would not need to pursue the petition if Sebi or the Finance Ministry take appropriate action.