UTI Mutual Fund, the country?s fourth largest mutual fund by assets under management, will be allowed to bring in a strategic investor without diluting the nature of existing ownership of the fund house. The strategic investor could hold up to 26% in the fund, sources said on Friday. UTI MF has also put off its plan of an initial public offer (IPO) to after March 2009.
An indication of this was given by finance minister Palaniappan Chidambaram, after his meeting with the board of UTI Mutual Fund.
The government is looking for a strategic partner to invest in UTI MF, Chidambaram said. However, majority stake of the four promoters will not be diluted following induction of the strategic partner, Chidambaram said after addressing board members of the fund house, Newswire 18 reported.
?We are looking at ways to bring in a strategic investor without diluting the majority holding of three banks and LIC (Life Insurance Corporation),? he said. UTI Mutual Fund is feeling a little shackled and they want to compete with other mutual funds, Chidambaram said while explaining the need to induct a strategic partner. UTI MF promoters are LIC, State Bank of India, Punjab National Bank and Bank of Baroda. Sources said the process of bringing in a strategic investor who could hold upto 26% would likely take around six months. A strategic investor could add enormous value to the fund, sources said. ?Many fund houses have strategic partners. UTI MF does not. It needs strategic investors,? sources explained.
?Today, various options were considered. It was felt in pre-IPO–which is already allowed by government and shareholders–we can look at strategic investors instead of financial investors,? said UK Sinha, chairman and managing director of UTI Mutual Fund. Sinha said the fund house had deferred its proposed IPO and therefore, also its pre-IPO placement.
?We had, in our IPO strategy, also a pre-IPO strategy, where we are supposed to get 20% additional money from private placement,? Sinha said. Sinha declined to give any further details of the strategic partner.
?Strategic partner means by nature it can provide synergy to our growth,competitiveness. Going forward we have to decide who, what and how the partner will be. I wish, I knew,? Sinha said. On the possibility of the kind of strategic partner, Sinha said it could be a very big distributor or a very big investor in India from abroad or a large group. In January, UTI Mutual had sought Securities & Exchange Board of India?s approval for the initial public offer, which was initially proposed to be complete by March. But the fund house had to put its IPO plans on hold due to turbulent stock market conditions.