Shares of UTI AMC surged 14% on the bourses on reports of the Tata Group, the promoter of Tata AMC, eyeing a significant stake in the company. A news report on Tuesday stated that the Tata Group is looking to buy about 45% in UTI AMC from four state-owned financial entities — Punjab National Bank, LIC, SBI and Bank of Baroda — its present shareholders. PNB holds 15.2% in the entity, while the other three hold 9.98% each, according to data for the latest quarter.
The acquisition of majority stake in UTI AMC will catapult Tata AMC to become the fourth-largest coming behind SBI MF, ICICI Prudential MF and HDFC MF. Currently, UTI AMC ranks eighth with assets of Rs 2.2 trillion, while Tata AMC stands in the 13th position with an AUM of Rs 88,400 crore. Tata AMC currently has a 2.6% stake in UTI AMC along with four other AMCs. Together, the five AMCs hold 13.7% in the company.
At the current market price, the Tatas will have to shell out around Rs 4,300 crore to buy a 45% stake in UTI AMC. Tata Sons and Tata Investment Corporation own 68% and 32% stakes, respectively, in Tata AMC, according to reports. UTI is a well-established brand with a wide distribution reach. Tata AMC has not been able to leverage the Tata brand and climb up the AUM ladder. “An acquisition makes sense as it will help the AMC acquire scale,” said an industry official, adding that the success of the deal will hinge on the amount under consideration. An acquisition of 25% or more will trigger an open offer, increasing the acquisition cost. It will also require a government nod and an agreement among the four government-owned shareholders. T Rowe Price is the single-largest shareholder and holds close to 23% in the AMC.
A Tata AMC spokesperson said the firm would not want to comment on speculative news. Increased competition from new-age fintech companies, the move to passives and a host of regulatory diktats are likely to spur consolidation in the mutual industry. Shares of other listed AMCs also rose on Tuesday. HDFC AMC shares gained 12% after a large block trade on the counter. Nippon India AMC was up 1.8% while Aditya Birla Sun Life AMC surged 2.9%.