The UTI conundrum

Updated: Aug 2 2005, 05:30am hrs
Its an old cliche that a business needs a maalik, and like most cliches, this one too has more than just a little bit of truth in it.

Im not trying to knock the concept of professional management here by maalik, I just mean a coherent body of stockholders who are able to act in concert to decide on a future for the business. By this standard, the government quickly needs to find a real owner for UTI Mutual Fund.

Currently, UTI Mutual Fund is owned by four public sector banks. But, this is little more than a piece of fiction that has been constructed to enable the creation of asset management compliant with the law.

The governments two objectives in finding a new owner should be the maximisation of the price that it can get for UTI, as well as the ability of the new owner to be a good investment manager for those who have invested with UTI.

Given that the government cannot really pretend that UTI is just another business for it and that all the millions who invested in it did so while they truly had a choice, the most important thing is to sell UTI to a buyer who has the best possible track record as an investment manager.

Of the names that are currently being mentioned, this is clearly State Bank of India (SBI), but surely the field can be broadened.

If the netas and babus decide on the new maalik for UTI on any grounds other than the quality of management, then that will surely be their final crime against UTIs customers.

The writer is chief executive officer with Value Research India Pvt Ltd