PNB, LIC, SBI and BoB looking to seek formal bids for stake sale in UTI AMC

These entities have already appointed merchant bankers to initiate the sale process in UTI AMC

Punjab National Bank (PNB), Life Insurance Corporation (LIC) of India, State Bank of India (SBI), and Bank of Baroda, all owned by the Centre, are working on inviting bids for selling their stake in the UTI Asset Management Company (UTI AMC), The Economic Times (ET) reported on Wednesday. Together these entities own 45 per cent of the stake in the company.

Citing sources aware of the matter, ET said that these entities have already appointed merchant bankers to initiate the sale process.

Earlier, the Tata Group was expected to buy the majority stake in UTI AMC from these four entities. But the deal could not go forward as a large investor insisted that a formal bidding process be followed instead of nomination.

The report added that the Tata Group will now put in a fresh bid for the AMC.

The Tata Group's asset management business is very small currently and with the bidding, it is aiming to scale up and become a significant player in the sector.

"It is mostly the Tata Group, which has a serious intent to scale up its asset management business and (has) the deep pockets to fund such an acquisition," a senior official at a leading mutual fund was quoted as saying by ET.

Moreover, Indian rules specify that if a company, that holds a 25 per cent stake in another company, wishes to acquire an additional 26 per cent, it must make an open offer to other shareholders. Thus, a single buyer of a 45 per cent stake will be required to make the open offer.

The four state-owned entities are not classified as promoters of UTI AMC as it has only sponsors. Another major investor in the AMC is T Rowe Price Group which holds a 22.96 per cent stake in the company, as on March 31.

UTI AMC has a market cap of Rs 8,800 crore as of Wednesday. Its assets under management (AUM) as of March 31 stood at Rs 2.39 trillion. It is six per cent of the total industry AUM.