In August last year T Rowe Price had filed a case in the Bombay High Court against the Union government asking it to prevent four PSU financial investors from scuttling UTI’s attempts at an IPO.
State Bank of India (SBI), the country’s largest lender, has decided to sell up to 8.25% stake in UTI Asset Management Company (AMC) through an initial public offering (IPO). Sources in the mutual fund industry say the fund house is likely to file its offer document with the Securities and Exchange Board of India (Sebi) in January.
SBI, in its exchange filing, said, “Pursuant to the applicable provision on the SEBI Regulation, we advise that the Executive Committee of the Central Board of Directors (ECCB) of the Bank at its meeting held today has accorded final approval, for divestment of SBI stake in UTI AMC upto 8.25% through IPO by way of offer for sale of up to 1,04,59,949 equity shares, subject to the approval of the Securities and Exchange Board of India, and/or such other concerned authorities and departments.
The data from Value Research show UTI Mutual Fund has assets under management (AUM) of Rs 1.57 lakh crore as on October 2019. Currently, Life Insurance Corporation (LIC), State Bank of India (SBI), Punjab National Bank (PNB) and Bank of Baroda (BoB) each hold 18.25% of the AMC’s shares. US investment company T Rowe Price holds 26% in the fund house.
If the IPO is announced, SBI may be able to lower its stake in UTI AMC from 18.25% to 10% and address the issue of cross-holding norms.
According to Sebi regulations, which were notified on March 13, 2018, no sponsor or mutual funds can have more than 10% or more of the shareholding or voting rights in the asset management company or the trustee company of any other mutual fund; or representation on the board of the asset management company or the trustee company of any other mutual fund. Apart from SBI, LIC and BoB also have their respective operations in the mutual fund business.
In August last year T Rowe Price had filed a case in the Bombay High Court against the Union government asking it to prevent four PSU financial investors from scuttling UTI’s attempts at an IPO. The petition asks for implementation of Sebi’s rules that the four PSUs lower their individual stakes in UTI to 10%. But later, T Rowe Price withdrew its case against Sebi, the government and four public shareholders of UTI AMC, stating that they are in talks with the government on certain issues raised in the plea.