Life Insurance Corporation of India (LIC) has turned down the proposal for an IPO for UTI Asset Management Company (AMC). As a result, the meeting that was to take place between the promoters of UTI last week has not been held as yet.
Of the four PSU shareholders, State Bank of India (SBI), Bank of Baroda (BoB) and Punjab National Bank (PNB) had agreed to the listing in early February. SBI, BoB, PNB and LIC each hold an 18.5% stake in UTI AMC, while the remaining 26% is owned by T Rowe Price, a US investment firm. Until all four PSU shareholders agree to the listing, sources say, UTI’s plan for an IPO cannot go through.
As per UTI’s shareholder agreement, shareholders have the right to direct the company to appoint a banker to establish the feasibility of listing. ICICI Securities was appointed for this after BoB, PNB and US firm T Rowe Price invoked this clause. The shareholders meeting was scheduled to resolve the stalemate.
While LIC was keen to buy out the other shareholders of UTI, the finance ministry was initially keen on just a small listing of, say, 10% of UTI’s shares. Since this would have resulted in T Rowe Price’s shareholding falling below the critical veto level, it refused to accept this — it was this veto power that allowed it to resist the finance ministry’s pressure to appoint its candidate as CMD.
T Rowe Price, however, has communicated that it is willing to dilute to below 26% if there is a broader listing since the mutual fund will then be board-managed and it does not want any veto power. It is not clear what the finance ministry’s current view is since all the banks are keen to list so that they can use the funds to meet their capital requirements.