UTI AMC eyes 26% divestment

UTI Asset Management Company (UTI AMC), India’s oldest mutual fund, is in advanced stages of discussions to divest 26 per cent to a strategic partner.

Sources close to the development said that the AMC is in discussion with three potential buyers, which include US-based T Rowe Price and Vanguard Mutual Fund. T Rowe Price is said to be the front runner, sources said.

The buyer is expected to pay Rs 1,500 crore to Rs 1,800 crore, which would value the AMC at between Rs 6,000 crore and Rs 7,500 crore.
 

UTI AMC Assets under management: Rs 38,358.14 crore*
Fund type	Number

Equity funds^  24 Debt funds^33 Short term debt^8 Hybrid funds^9 Closed-end funds77 * As on  November 30, 2008;
^ open-ended funds
Sources Value Research

The deal will not entail an expansion of capital. Instead, all the four government-owned promoters of UTI AMC — State Bank of India, Punjab National Bank, Bank of Baroda and Life Insurance Corporation of India — will divest their 25 per cent holdings proportionately.

The chairman of one of the promoter-banks confirmed that all four promoters have given UTI AMC’s management a mandate to find a strategic partner. UTI AMC, however, declined to comment. “The fund is negotiating with more than three players and no name has been finalised at this point of time,” a senior official said.

The mandate to find a strategic partner follows UTI AMC’s decision to pull out of a Rs 2,500 crore public issue in January this year owing to the downturn in the stock markets.

UTI AMC has assets under management (AUM) of around Rs 38,000 crore, significantly lower than Rs 56,854 crore in December 2007,” sources said.

It is, however, considered one of the country’s more profitable AMCs. “As of March 2008, UTI AMC posted a net profit of around Rs 150 crore, which is more than double its nearest rival,” sources said.

UTI AMC was formed in 2003, when the government was forced to restructure the erstwhile Unit Trust of India following a payments crisis. All assured return schemes were transferred to Special Undertaking of UTI (SUUTI) and the rest to UTI AMC.

The government subsequently divested its ownership in UTI AMC in favour of these four institutions for Rs 1,250 crore.