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Global asset management firm T Rowe Price International can retain its stake in UTI Mutual Fund, with market regulator SEBI taking the view that the firm has not violated cross-holding norms by holding stakes in mutual fund (MF) companies outside India.
Two other large shareholders in UTI MF — SBI and LIC — had called for a stake reduction by T Rowe Price on the grounds that SEBI’s new cross-holding norms should not make a distinction between domestic and foreign shareholders. In a representation to SEBI and the Department of Investment and Public Asset Management, SBI and LIC had said that T Rowe Price, which holds a 26 per cent stake in UTI AMC, should be directed to bring down its stake in the company, just like them.
SEBI Chairman Ajay Tyagi told BusinessLine the cross-holding norms apply only to domestic firms that have conflicting business interests in India; hence T Rowe Price need not trim its stake in UTI MF.
Pitched legal battle
The US headquartered T Rowe Price is locked in a pitched battle with four other large shareholders of UTI MF — State Bank of India, Life Insurance Corporation, Bank of Baroda and Punjab National Bank.
The Indian entities own stakes in other mutual fund companies in the country as well, and hence need to pare their stakes in UTI MF from 18.24 per cent each to 10 per cent to keep within permissible limits. However, SBI and LIC wanted T Rowe Price also to reduce its stake as it has interests in the MF business in the US.
But with the regulator making a distinction between holdings within and outside the country, T Rowe Price is set to win this battle. The tussle brewing in UTI MF took a legal turn earlier this month with T Rowe Price filing a case in the Bombay High Court against the Centre and the four other shareholders, insisting that they dilute their stakes through an IPO.
T Rowe Price has accused the UTI MF directors representing the four public sector entities of stifling the company’s growth to promote their own MF subsidiaries.
Once the four entities trim their stakes to 10 per cent each before the March 2019 deadline, they will also lose board representation in UTI MF to independent shareholder directors.
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