The Hindu Business Line : All options open on UTI MF rejig

The Government is considering all possible combination of the existing sponsors taking over the mutual fund, including the option of the entire set of four sponsors retaining their hold over the mutual fund.

The four existing sponsors of UTI MF are Life Insurance Corporation, State Bank of India, Punjab National Bank and Bank of Baroda each having 25 per cent stake in the asset management company.

According to institutional sources, at the recent meeting with the sponsors, the Government has discussed the entire gamut of combinations of the existing sponsors taking over the institution and has not yet homed in on any specific plan.

"The Government came up with all options including one, two, three or even all four sponsors continuing to retain control," a source said.

He said that whoever individually or collectively takes over the fund would be asked to pay a premium to the Government for acquiring the assets.

"The extent of premium and the pattern in which it would be shared among the institutions that are retained as sponsors would be decided at a later stage. The discussions did not come down to the specifics such as the premium amount," the source said.

However, it is understood that the Government is likely to seek a substantial premium from the institutions that take over the mutual fund. The control premium is generally arrived at as a percentage of the assets under management of the fund.

UTI MF currently has assets under management of about Rs 23,000 crore under its 50-odd schemes.

In the past, discussion for change of sponsors of UTI MF has got stuck on the issue of payment of premium to the Government for taking charge of the huge assets under management.

Institutions were unwilling to pay a premium since the mutual fund was going through a rough patch in the immediate aftermath of the bifurcation of the erstwhile UTI due to a dull capital market.

In January 2003, the UTI was split into UTI MF and UTI Specified Undertakings with the former bagging all the net asset value-based schemes of UTI and the latter being given the responsibility of all assured return schemes and UTI's flagship scheme, US-64.

However, in the present scenario, the sponsors might find it difficult to argue against paying a premium in the wake of UTI MF doing a major turnaround buoyed by a general improvement of the stock markets and the management's efforts to infuse fresh vigour in running the fund.

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