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Unit Trust of India, the first financial organisation to act as a vehicle for investment in the capital market by Indian citizens, turns 50 this Sunday.
Parliament passed the UTI Act in 1964 and the Trust was formed, solely ruling the space for almost two decades. Friday also marked the 11th year of UTI as a fund house registered with the Securities and Exchange Board of India. During UTI’s five decades, it saw various ups and downs. The current century has been a bumpy ride and it was ultimately bifurcated into UTI Asset Management Company (UTI AMC) and Specified Undertaking of UTI or the famously known SUUTI.
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What followed later kept it in the limelight. The employees unions agitated, it lost to competitors as assets under management declined, it remained headless for two years, there was a recent row over selection of a new managing director.
Leo Puri, the newly appointed and much-awaited MD of UTI Mutual Fund (fifth largest now in the country), earlier told Business Standard the past decade saw a change in MF distribution coinciding with the time UTI was dealing with some of its ‘issues’.
The 21st century began on a sad note for UTI. Failure of its flagship and largest selling US-64 scheme, considered unsinkable, brought unforeseen disaster for investors. The central government got into rescue mode and repealed the UTI Act, paving way for bifurcation of the institution. SUUTI constitutes the assets and liabilities of schemes for which the government rushed in with a bail package.
The past decade has not been smooth sailing for UTI MF, too. The government was quick to transfer its ownership to four of the country’s top financial giants — State Bank of India, Life Insurance Corporation, Bank of Baroda and Punjab National Bank, each holding a fourth stake. Then, some years earlier, the US-based T Rowe Price Group acquired a 26 per cent stake in UTI Asset Management Co, to become the largest shareholder, pushing the others’ stake to 18.5 per cent each.
Other AMCS — HDFC, Birla Sun Life, ICICI Prudential, Reliance MF — have gained market share during the period and pushed UTI AMC to fifth place in terms of assets under management (AUM). “Due to this distraction (dealing with UTI’s internal issues), our competitors were able to take advantage of it,” Puri had noted. His appointment took a little more than two years, as there were disagreements among UTI’s stakeholders. T Rowe Price is reported to have reservations over Puri’s lack of asset management experience, which stalled the process.
As on end-December 2013, the AUM of UTI MF was Rs 71,357 crore. A bit more than half or Rs 37,900 crore are in equity, commendable when the sector’s overall equity assets are 22 per cent of AUM. UTI also has an upper hand over peers in terms of the assets it has from regions beyond the top 15 cities (B-15). Against the sectoral average of 13 per cent in these, UTI AMC has a little over a fourth of assets from smaller towns and cities. Currently, it has 150 branches across the country, which UTI calls District Financial Centres. Of it, 106 are in B-15 and the fund house plans to open 27 more before this financial year ends.
