India’s law does not allow any sponsor such as SBI, PNB, BoB or LIC to hold more than a 10% stake in more than one asset management company, but an initial waiver was given.
After close to a decade of the government trying to interfere in the running of one of India’s top mutual funds – FE first reported the government trying to foist its nominee as UTI’s CEO in 2011 https://bit.ly/315OjiD – the decks have been cleared for it being run independently.
Sebi has given its approval for a Rs 3,000-3,500-crore IPO that will see the shareholding of three PSU shareholders – SBI, LIC and Bank of Baroda – go down to just below 10% each while Punjab National Bank will go down to 15.24%. US investment firm T Rowe Price will go down to 23%. Five shareholders of the UTI AMC will be selling nearly 3.89 crore shares through the IPO.
While T Rowe Price managed to prevent the finance ministry from having its nominee as the chief in April 2011 thanks to its 26% shareholding – the UTI Trustee Board was also against the finance ministry foisting its nominee – whether UTI remains independent depends upon whether the four PSUs act in unison. Over the past several years, most attempts to have an IPO have been scuttled and two of the PSUs even tried to merge UTI with the mutual funds they ran.
India’s law does not allow any sponsor such as SBI, PNB, BoB or LIC to hold more than a 10% stake in more than one asset management company, but an initial waiver was given. In March 2018, Sebi said the four PSUs would have to comply with the rules, but it did not enforce this and, instead, gave an extension for a year.
Officials in the fund house say that, work on IPO has already started and it can hit the markets in the next two months. The fund house having an average asset under management of Rs 1.51 lakh crore as on January-March 2020, had filed an offer document with market regulator in December last year.
Recently, Imtaiyazur Rahman was appointed as the Chief Executive Officer (CEO) of UTI AMC by its Board. Rahman was an internal candidate for the position which fell vacant after completion of the term of the earlier CEO in 2018.
In August 2018, T Rowe Price had filed a case in the Bombay High Court against the government of India 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, government of India and four public shareholders of UTI AMC stating that they are in talks with the government on certain issues raised in the plea.
UTI AMC and its predecessor (Unit Trust of India) have been active in the asset management industry for more than 55 years, having established the first mutual fund in India. Kotak Mahindra Capital Company Limited, Axis Capital Limited, Citigroup Global Markets India Private Limited, DSP Merrill Lynch Limited, ICICI Securities Limited, JM Financial Limited and SBI Capital Markets Limited are the Book Running Lead Managers (BRLMs) to the offer.