LIC invites bids for stake sale in unlisted company

Published: November 12, 2019 9:48:03 AM

The Securities and Exchange Board of India (Sebi) has been insisting that UTI’s four domestic shareholders will have to pare their stakes to less than 10 per cent each and rejected the requests of shareholders for extension of stake sale.

Mutual Fund, MF, equity MF, Mutual Fund Scheme Merger, Asset Management Company, AMC, Securities and Exchange Board of India, SEBI, Dividend Distribution Tax, DDT, Net Asset Value, NAV, fund valueAs the crossholding rules of market regulator Sebi applies to all the four promoters, they will have to bring down the stake in UTI Mutual Fund below 10 per cent.

Life Insurance Corporation of India (LIC) has invited bids from merchant bankers for disinvestment of its “stake in equity shares of an identified unlisted company through a transparent bidding process”. While Life Insurance Corporation did not disclose the name of the “unlisted company” in an advertisement, sources said the company is likely to be UTI Mutual Fund. UTI Mutual Fund’s four domestic shareholders — Life Insurance Corporation, State Bank of India, Punjab National Bank and Bank of Baroda — hold around 18.5 per cent stake each. The four stakeholders also have their own asset management companies (AMCs).

As the crossholding rules of market regulator Sebi applies to all the four promoters, they will have to bring down the stake in UTI Mutual Fund below 10 per cent and give board seats. US-based fund T Rowe Price holds the remaining 26 per cent stake in UTI Mutual Fund.

In March 2018, Sebi had introduced crossholding limits in mutual funds to eliminate potential conflicts of interest. The markets regulator then mandated that if a shareholder has more than 10 per cent interest in a mutual fund, it cannot hold a similar-sized stake in another fund house and would also have to give up its board positions.

The Securities and Exchange Board of India (Sebi) has been insisting that UTI’s four domestic shareholders will have to pare their stakes to less than 10 per cent each and rejected the requests of shareholders for extension of stake sale. “However, as UTI Mutual Fund didn’t have a chief executive, it was unable t push for an IPO (initial public offering) through which the four promoters could have offloaded their stake. The board of the UTI Mutual Fund couldn’t appoint a full-time CEO after Leo Puri’s tenure as MD ended last year,” said an official.

Imtaiyazur Rahman has been the acting CEO of UTI Mutual Fund for almost a year now. The fund has an asset under management of over Rs 1.57 lakh crore UTI was set up in 1964 through an act of Parliament. It was split into the Specified Undertaking of the Unit Trust of India (SUUTI) and UTI AMC after the US-64 scheme collapsed. UTI’s NAV-based schemes were shifted to UTI AMC, while large equity holdings and other assets including real estate went to SUUTI.

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