Financial Daily from THE HINDU group of publications
Tuesday, Sep 20, 2005
Financial Daily from THE HINDU group of publications Tuesday, Sep 20, 2005 |
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Mutual Funds Markets - Mutual Funds Future ownership: Three-stage plan for UTI MF on cards Existing sponsors may be allowed to exit after 3 yrs Sarbajeet K. Sen
New Delhi , Sept. 19 UTI Mutual Fund is likely to sport the present `public' character of ownership for at least the next three years, according to plans currently under the Government's consideration. The latter is considering a staggered three-stage plan for the future ownership of the UTI Mutual Fund. An outside entity could be taking over the fund three years after the recast plans are inked. As per this plan , the four existing institutional sponsors would be initially required to maintain status quo for at least a year. During the second stage that would span the two subsequent years, the four sponsors would be permitted to work out any arrangement between themselves where up to three of them could exit by selling off their holding to the others in the pack. In the third and final stage after the three years, the sponsors would also have the right to exit the mutual fund by allowing an outside entity to take over the reins. The four existing sponsors of the fund are the Life Insurance Corporation of India, State Bank of India, Punjab National Bank and Bank of Baroda who hold a quarter each of the Rs 10 crore paid-up capital of the asset management company. The roadmap for UTI MF would also require the existing sponsors to pay a fee to the Government for taking full control of the fund. The Ministry of Finance is of the opinion that it had handed over the fund to the existing sponsors for a nominal consideration in early 2003 for which it must be compensated. Discussions are currently on between the Government and the sponsors to determine the fee to be dished out. The current phase of talks for restructuring the ownership of UTI MF were initiated after a Parliamentary panel had spotted conflict of interest in the ownership structure since all the four sponsors had their own separate mutual fund outfits. However, the Government found it difficult to identify new sponsors with most entities that were sounded out refusing to pay the control premium that was being sought. UTI MF is the largest mutual fund in the country with close to Rs 23,000 crore of assets under management. More recently, the Government has decided that a sudden change of sponsors would not be in the best interest of the mutual fund. Consequently, it had embarked on plans that would allow a gradual pullout. The erstwhile Unit Trust India (UTI) was split into UTI MF and Specified Undertakings of the UTI (SUUTI) in January 2003. While the former housed all the net asset value-based schemes of UTI, the latter was given all assured return schemes and UTI's flagship scheme, US-64.
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