On Wednesday, State Bank of India (SBI) had announced that it would sell up to 8.25% stake in UTI Asset Management Company (AMC) through its public offer.
Securities and Exchange Board of India (Sebi) on Friday directed Life Insurance Corporation of India (LIC), State Bank of India (SBI) and Bank of Baroda (BoB) to bring down their shareholding and voting rights in UTI AMC and UTI Trustee below 10% by December 2020.
Market regulator also said that in the event of non-compliance with the directions, the shareholding and voting rights of the three companies in UTI AMC and UTI Trustee in excess of 9.99% and corporate benefits would be frozen till such time they complied with the directive.
UTI Mutual Fund is promoted by four public sector financial institutions as sponsors, viz., State SBI, LIC, BoB and Punjab National Bank (PNB) with each of them holding 18.24% stake in UTI Asset Management Company and 18.50% each in the UTI Trustee Company. T Rowe Price holds 26% stake each in UTI AMC and UTI Trustee. Sources in the mutual fund industry say that the fund house is likely to file its offer document for its initial public offering (IPO) with Sebi in January.
On Wednesday, State Bank of India (SBI) had announced that it would sell up to 8.25% stake in UTI Asset Management Company (AMC) through its public offer. Sebi had notified in March 2018 that no sponsor or mutual funds could have more than 10% or more of the share-holding or voting rights in the asset management company or the trustee company of any other mutual fund. The regulator had also disallowed board representation. Regulator had given time of one year to comply with the regulations to the financial institutions having stakes in UTI AMC.
Sebi in its order on Friday said that LIC, SBI and BoB, had sought more time to comply with the requirements of the amended regulations. “The requests for extension of time to comply with the requirements of Regulation 7B of MF Regulations could not be acceded to and the SBI, LIC and BoB were advised to comply with the requirements within the specified timeline of March 12, 2019,” said Sebi in its order.
Earlier it was proposed that the stake sale would be undertaken through an IPO in two step process after the government of India had approved the disinvestment plan. However Sebi was not satisfied with the replies and issued show cause notices to LIC, SBI and BoB. In the submission, the entities mentioned that they had requested the Department of Investment and Public Asset management (DIPAM) through various letters to seek additional time from Sebi in this regard.
“Later DIPAM accorded approval for the divestment of stake in UTI AMC by sponsors/shareholders in two phases — 25% divestment of stake by all the institutional shareholders on pro-rata basis and 10.92% divestment in the second phase by way of FPO,”said Sebi in its order.
But TRP was not in agreement with the aforesaid plan and hence, multiple meetings were held with them and a revised divestment plan providing for stake reduction of 8.25% each by LIC, SBI and BoB and 3% of stake each by TRP and PNB at one go by way of IPO. Finally on September 12, 2019, DIPAM has approved the proposed divestment plan through IPO.