State Bank of India has fired a fresh salvo in the battle of control over UTI even as the government and UTI’s largest investor, US investment firm T Rowe Price (TRP), are trying to hammer out a peace settlement. In a letter to the UTI Trustee Company on Saturday, SBI has asked for the removal of Ashok K Kini as a director on its board. Kini heads the UTI Trustee Board which, in line with Securities and Exchange Board of India (Sebi) regulations for mutual funds, had asked that the four PSU shareholders — including SBI — lower their equity in UTI to 10% each from the present 18.25%. The trustee board also asked for a 12-month extension for Leo Puri who was UTI’s managing director till his term ended on August 13, so that the initial public offering (IPO) process could be completed smoothly.
Though the stance taken by the UTI Trustee Company has been the same as that advocated by TRP, which is looking for an independent board-managed UTI, SBI sources say their letter is independent of the battle for the control of UTI. According to a senior official from SBI, Kini has been on the board of the trustee company for 11 years and SBI thought it was time to nominate another person. “We have the right to nominate another person for the same designation,” the official said, while adding that Kini had, in fact, been originally nominated at the trustee company by SBI. While the contours of the peace plan are yet to be made public, the original finance ministry proposal had envisaged a small IPO, perhaps up to 10% of UTI’s equity — which would have lowered TRP’s stake to below the critical level of 26% that allows it to block certain resolutions.
Once this took place, the government would have been free to choose a chairman or managing director for UTI as it tried to do in FY12. Even if the PSUs lower their collective stake to 40%, once TRP’s stake is below 26%, it will no longer be possible for it to resist a government appointee as either chairman or managing director of UTI. TRP went to court against the government last fortnight on the issue of PSUs trying to take over UTI by scuttling its plan for an IPO and by ensuring that Puri’s tenure was not extended; it also sued Sebi since, while it had petitioned Sebi and asked it to act in the matter, the markets regulator had taken no action. UTI has 11 million shareholders, lakhs of pensioners and a corpus of Rs 3.6 lakh crore.