UTI MF set to be first domestic asset management company to bring an IPO

Key stakeholders like SBIon board; LIC also gives conditional approval

The initial public offering (IPO) of the UTI Mutual Fund (UTI MF) — the first by a domestic asset management company (AMC) — could soon be a reality, with key stakeholders, including the State Bank of India (SBI), finally coming on the same page.

The listing plan of the country’s sixth-largest fund house had hit a block, with the SBI and the Life Insurance Corporation of India (LIC) trying to wrest control over the AMC. Other stakeholders — the Bank of Baroda (BoB), the Punjab National Bank (PNB) and the T Rowe Price Group — had no qualms with the IPO.

The LIC has reportedly given a conditional nod for the IPO. Sources said the state-owned insurer has told the asset manager to address certain governance issues. This includes appointment of a chairman; the position has remained vacant for seven years. The insurer also wants the fund house to appoint a nominee director to its board.

Sources added the UTI MF had already started getting ready for a meeting of shareholders to discuss the IPO road map. The fund house has sought the finance ministry’s intervention to get the LIC on board without any precondition.

The fund house intends to file the offer documents with the markets regulator, the Securities and Exchange Board of India (Sebi), before June. 

Sources said the fund house had also appointed ICICI Securities to help with the IPO.

“Based on our initial discussion, the IPO is likely to be very successful, given the development of business and the level of interest among global and domestic investors. The valuation for the fund house could be in excess of $1 billion (about Rs 6,800 crore),” said an investment banker, who did not want to be named.

The UTI MF is also in conflict with Sebi norms that restrict a sponsor from floating more than one fund house.

The UTI MF’s four existing sponsors — the LIC, the SBI, the BoB, and the PNB — also operate separate AMCs. Each owns an 18.3 per cent stake in the UTI MF, while 26 per cent is with the US-based T Rowe Price Group.

To address the conflict, the UTI MF wants existing shareholders to exit in the proposed IPO route. A query sent to the UTI MF and the LIC on Monday remained unanswered.

“We do not want a structure where it (the fund house) is owned by banks and corporate entities,” Managing Director Leo Puri had said in a recent interaction with Business Standard. 

The LIC, at one point, was also considering an option to merge its mutual fund arm with the UTI MF. 

Industry players said LIC’s caveats could delay the IPO.

Under the current structure, AMCs are not mandated to have a chairman. If needed, shareholders can decide on it after the IPO. 

In the current scenario, where most AMCs are backed by corporate houses, the listing would bring professionalism to the sector and would also help in development of the market, said Manoj Nagpal, chief executive officer, Outlook Asia Capital. 

The UTI MF had average assets under management (AUM) of Rs 1.37 lakh crore in the March quarter.