Holding cap may spur UTI AMC to list

The Securities and Exchange Board of India’s (Sebi’s) move to put a 10 per cent cross-shareholding cap in mutual funds may finally pave the way for UTI AMC to list itself on the bourses, provided the government gives its nod.

The market watchdog’s move is aimed at preventing a conflict of interest that may arise out of holding stakes in different mutual funds. Four large public sector financial institutions as sponsors — State Bank of India (SBI), Life Insurance Corporation of India, Bank of Baroda (BoB) and Punjab National Bank (PNB) — each own 18.29 per cent of the paid-up capital of the AMC. Each of these entities is a sponsor of other mutual funds as well, which is where the conflict of interest arises. 

UTI’s fifth shareholder is T Rowe Price Group Inc, which holds 26 per cent in UTI through its wholly owned subsidiary, T Rowe Price International.  Assuming that the AMC opts for an initial public offering (IPO), the four sponsors can offload 8.29 per cent each through an offer for sale.

As of September 2017, the AMC has assets of Rs 1.5 lakh crore, according to the Association of Mutual Funds in India (Amfi) data. At six per cent of its assets, the fund house could command a valuation of Rs 9,000 crore. This means the total stake sale of 33.2 per cent from the four sponsors could collectively fetch about Rs 3,000 crore.  An email sent to UTI AMC regarding the possibility of an IPO remained unanswered. 

UTI’s legacy and brand recognition, together with a robust distribution network and access to public sector money, could work in its favour, and help it command a premium, said experts. The AMC has been consistently profitable and reported a net profit of Rs 291 crore for FY17. 

In November 2009, T Rowe Price had agreed to buy a stake in UTI AMC for about $140 million, or about Rs 650 crore, valuing the fund house at about Rs 2,500 crore, or 3.2 per cent of its average assets under management. 

UTI was the number one asset manager in terms of assets it managed till FY06. It then slipped to No. 3 at the end of FY07, No. 4 in FY09 and to No. 5 at the end of FY12. It is currently at No. 6. 

According to news reports, LIC had turned down the proposal for an IPO for UTI earlier this year, even as the other three PSU shareholders — SBI, BoB and PNB — agreed to the listing in early February.

The AMC had wanted to go public way back in 2008 but put its IPO plans on the backburner owing to volatile market conditions.

UTI MF had struggled to appoint a new chief after erstwhile chief U K Sinha left the firm in February 2011. It finally appointed Leo Puri as managing director in August 2013.