UTI AMC gets majority nod for listing

Shareholders Bank of Baroda, PNB and T Rowe Price on board

UTI Asset Management Company (AMC) could well become the first mutual fund (MF) to be listed in the stock market. Sources close to the company said two shareholders — Punjab National Bank (PNB) and Bank of Baroda (BoB) — have given it a ‘listing notice’ recently. US-based T Rowe Price International, which has a 26 per cent stake, had given permission earlier.

UTI AMC has five shareholders — State Bank of India (SBI), Life Insurance Corporation of India (LIC), PNB, BoB and T Rowe Price. All four public sector banks hold 18.5 per cent each and T Rowe Price holds the other 26 per cent. With BoB, PNB and T Rowe Price already on board, the company has 63 per cent of shareholders’ backing for its proposal to list.

When contacted, UTI AMC refused to comment. A listing notice from shareholders allows it to appoint a banker and conduct a feasibility study for the initial public offering (IPO).

The management of UTI AMC, led by Chief Executive Officer Leo Puri, had sent the proposal to the government around two years earlier. However, LIC and SBI have indicated their preference for merging it with their own MF businesses. Once SBI entered the fray, LIC has taken a backseat, sources said.     

This recent development makes UTI’s case stronger with the finance ministry, which needs to issue a letter of approval for the listing. The shareholder agreement with T Rowe Price also envisaged the listing option, with a condition that all shareholders should agree within a reasonable time frame.

Sources close to the development said that both BoB and PNB have been saddled with non-performing assets. “Monetisation of the UTI stake will give them some relief,” said a sectoral player.

There is a question of following guidelines of the Securities and Exchange Board of India (Sebi). “There are four main PSBs as shareholders and they have MFs of their own. According to Sebi regulations, one sponsor cannot run two asset management companies. UTI MF is the only exception to the rule at present,” said Prithvi Haldea, founder-chairman at PRIME Database.

According to Haldea, who was also on the board of UTI AMC for six years, initially the idea was that at some point all the four public sector companies would exit, which has not happened in all these years. “Listing is a must to dilute their shareholding. They can be minority shareholders. They can also make some decent money on their investments. Banks also need capital and they should be happy to exit and raise money for their own core business,” added Haldea.

SBI’s interest in UTI is primarily because the acquisition will make it the biggest player in the MF industry.

It has assets of Rs 1.2 lakh crore as of June-end, and will become the top player, with Rs 2.3 lakh crore assets, if the UTI AMC (Rs 1.12 lakh crore) comes within its fold. ICICI AMC will be a distant second at Rs 1.9 lakh crore. LIC, which has only Rs 13,040 crore of assets, will become the fifth largest player in the industry if UTI MF is merged with it.

Sandeep Parekh of Finsec Law Advisors said listing is always the best option for all shareholders because of the transparency and clarity of valuation it brings to the process.