Their resignation is seen as a protest against the raging battle between the finance ministry and the company board over the appointment of a new chief for the company.
While the board went along with a proposal to appoint a professional search firm to shortlist candidates, the finance ministry through the four financial institutions is in favour of appointing IAS officer Jitesh Khosla, the brother of Omita Paul, the finance ministers advisor.
After a behind-the-scenes battle between the four PSUs and US investment firm T Rowe Price that owns 26% of UTI MF that lasted several months, a solution was found appoint Khosla as chairman and appoint a professional as the CEO from the original list of candidates for the chairman-and-managing director's job. While this seemed a done deal, Khosla is believed to have said that he was not in favour of splitting the job.
UTI MF has been without a chairman since February this year after UK Sinha resigned to move on as chairman of Sebi. Last month, the senior-most director on the board, Anita Ramachandran put in her papers while Prithvi Haldea, another member on the board, has also quit. Both cited personal reasons for moving on though those in the know point to the tussle with the finance ministry.
Other than Sinha, there were seven members in the board. Of these two are from the foreign investor T Rowe Price, which has 26% shareholding in the company. With the departure of Ramachandran and Haldea, the seven-member board was left with only three independent directors Pradip Jain, PR Khanna and Sachit Jain. They have offered to resign despite the company shareholders having voted for their continuation for another three-year term last month.
The three are learnt to have sent in their papers to Janki Ballabh, the chairman of the UTI Trustee Company (every mutual fund has a trustee company, as per Sebi rules). When contacted, Janki Ballabh, however, declined any knowledge of the matter and suggested that the four PSU shareholders be contacted instead.
In their offer, the members have underlined the immediate need to appoint a CEO for the company. UTI, they have said, is too valuable a company for the Indian financial sector to come to such a pass. They have pointed out that the institution developed the mutual-fund concept, first as a government run company since 1961 and later as a public sector sponsored fund since 2003.
Even now the company runs several of the state and central government's newly launched pension plans whose fortunes will be severely crippled if the uncertainty continues.
Company insiders say the resignations are likely to be discussed soon by the representatives of the four public sector sponsors, namely LIC, SBI, PNB and BOB. With these resignations, incumbent chairman Jitesh Khosla will be able to appoint his own team on the board.
Khosla's appointment is the reason for the public fallout on the board of UTI AMC. His candidature is supported by the finance ministry over ruling the plan by the board to use an executive search firm, Egon Zehnder to short list candidates for the post. He was not one of those on the list but got the nod as the nominees of the four sponsor firms supported his candidature. Khosla, an IAS officer, is currently serving as additional chief secretary in Assam.