Ironically, as reported by this newspaper, the bank has the right to use the UTI brand name only until 2008 and owns neither registration nor copyright to the UTI Bank name. At the same time, the future of the parent company is uncertain. After the double debacle in 1998 and 2000, the former Unit Trust of India was split into two. The UTI Special Undertaking which owns the UTI Bank shareholding is due to be wound up, while the long-term future of UTI Mutual Fund (UTIMF) is also uncertain. The latter is owned by four public sector entitiesLife Insurance Corporation (LIC), SBI, Punjab National Bank and Bank of Baroda, who were directed by the government to acquire a 25% stake each.
In 2005, SBI and LIC made a pitch to buy out the other promoters and acquire UTIMF and merge it with their own mutual funds after a parliamentary panel raised the issue of conflict of interest. But the conflict was obvious even when UTIMF was created, so the government simply postponed an immediate decision by permitting one of the four shareholders to buy out the others in three years.
This still does not resolve the fate of the UTI brand name. If UTIMF is acquired by one of the promoters or sold to a strategic investor, the new management will doubtlessly merge it with their Asset Management Company (AMC) and extinguish the UTI brand name. After all, if UTIMF is allowed to exist as an independent entity, the sharing of a brand with UTI Bank without a common shareholding will be unnecessarily confusing.
One suggestion that has been made is to allow UTIs unit-holders to buy out the existing promoters in a cooperative set-up. But this seems rather Utopian in the Indian context without any guarantee that the fund performance or management costs under such an arrangement will in fact be better. So, what happens to the UTI brand name, which was a byword for investors faith for 25 years UTI Bank seems set to be the sole custodian of the brand name but with its own problems. The bank has recently set up a couple of entities with the tag of UBLwhich stands for UTI Bank Limited. This includes a sales entity and an AMC.
One suggestion has been to allow unit-holders to buy out the current promoters. But this seems Utopian in the Indian context. So, what happens to the UTI brand name, which was a byword for investors faith for nearly 25 years
UTI Bank is getting quietly aggressive and forging a variety of relationships across the financial spectrum. It has refused to be fettered by the business interests of its promoter companies and is threatening to grow beyond them. The management is also careful not to dilute its record of maintaining return on equity at over 25%. This rules out UTI Bank offering a hefty price premium merely to obtain the brand name; at the same time, the existing promoters invested in UTIMF under a government directive and dont have much of a case to extract a premium. This only means that the fate of the UTI brand will be decided by the government, not necessarily on commercial considerations alone.