UTI AMC stakeholders continue to be at odds despite govt intervention

LIC writes to Dipam saying IPO could be delayed, as T Rowe not cooperating; US-based fund house says it is supportive of IPO

Despite Central Government intervention, UTI Asset Management Company’s principal sponsors continue to be at loggerheads.

According to sources, the Life Insurance Corporation (LIC) has written to finance ministry’s divestment wing Department of Investment and Public Asset Management (Dipam), stating that the fund house’s initial public offering (IPO) is not likely in the near term.

It has alleged UTI AMC’s foreign sponsor, T Rowe Price, is not cooperating with the board decision on initiating the process to appoint new managing director and chief executive officer (MD and CEO).

“The foreign fund house is not vetting board proposal to start the selection process for appointment of MD and CEO. This could result into further delay in the IPO process. The delay could hurt public sector banks, who are planning to divest their stake to raise money,” said a government official privy to the development.

Denying the allegation, T Rowe said that their representatives on the UTI AMC board are participating in the search process. In an email response to Business Standard, it said that they are fully supportive of the IPO.

“We have been fully supportive of IPO of UTI MF for several years, as the best solution for the company, and for the Indian shareholders who have to be in compliance with the Sebi’s Mutual Fund Regulation by March 2019. We have recently reiterated our view to the finance ministry, which has yet to give its approval of an offering. It is our understanding that the company is preparing for an IPO but has not yet received the support from all of the Indian shareholders,” said Craig Smith, vice-president and head of corporate communications at T Rowe Price.

Amid an escalation of the row, domestic shareholders have move Securities and Exchange Board of India (Sebi) seeking more time to comply with the cross-holding norms. The four domestic shareholders also want T Rowe Price to pare its holdings in UTI AMC.

Sources say Sebi doesn’t see any merit in the domestic shareholder’s demand, as the foreign fund house does not have cross-holding in another fund house in India, while all the domestic shareholders operate separate mutual funds.

Earlier, T Rowe Price had moved court against AMC’s board and domestic sponsors, seeking government intervention in the matter.

In the petition that it filed before the Bombay High Court in August, the foreign sponsor had claimed that four public sector undertakings -– LIC, State Bank of India (SBI), Punjab National Bank (PNB) and Bank of Baroda (BoB) -- were trying to stall the company's proposed IPO.

The petition had also sought implementation of Sebi's rules and regulations and extension of the term of former MD & CEO Leo Puri for another year to see the IPO through.

T Rowe Price alleged that the four PSUs, which together own 74 per cent in UTI AMC, are not in favour of granting Puri a second term.

The petition had also sought Sebi’s help in asking the four domestic shareholders to bring down their holding in the fund house to 10 per cent each from the present 18.50 per cent.

It claimed that as per a regulatory order issued by Sebi in March this year, no shareholder of one asset management company can own more than 10 per cent in another, and those who own such stakes need to bring them down by March 2019. Such shareholders would not be allowed to be on board of both AMCs.

However, the foreign fund house had withdrawn its petition after government intervened and assured that the concerns raised would be addressed soon.  

Blame Game

• LIC writes to Dipam stating UTI IPO might get delayed
• Insurer says T Rowe Price not supporting in board decision making
• T Rowe allegedly not vetting AMC's board proposal to start selection process for new MD&CEO
• Four domestic stakeholders ask Sebi to extend deadline for meeting cross shareholding norms
• T Rowe however says that they are fully supportive for the IPO and selection process
• Former MD &CEO Leo Puri tenure ended in August