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The government is keen that recent disagreements over the term of the chief of UTI Asset Management Company sorted out at the earliest to ensure smooth operations at the country’s oldest and largest fund house.
“The Finance Ministry is viewing it as an internal matter of the company and does not want to get actively involved. But it wants the shareholders to reach an agreement, as even last time, it took two years to find a replacement,” said a person close to the development.
Sources said that while the current incumbent Leo Puri’s extension as MD and CEO of UTI AMC is uncertain at present, he could be given an extension until an interim CEO is appointed, if not till the proposed initial public offering is launched.
“The process for appointing a CEO will take at least three to four months. Even if it gets started by the month-end, a replacement will be unlikely until the new year, if not later,” noted the source.
Shareholders’ dilemma
Puri’s five-year term is set to come to an end next week and shareholders have been unable to reach an agreement on whether to give him an extension or seek a replacement.
He had been appointed as the head of UTI in 2013, two years after the previous Chairman and MD UK Sinha left to join SEBI in 2011. The four domestic and state-owned shareholders of UTI AMC Bank of Baroda, LIC, Punjab National Bank and SBI, hold 74 per cent stake in the fund house while US-based T Rowe Price holds the remaining 24 per cent stake.
The domestic shareholders are understood to have sought a new CEO in place of Puri as they are of the view that his performance has not been up to the mark. Meanwhile, T Rowe Price has been batting for him and has also appealed to market regulator SEBI.
“The independent UTI Mutual Fund Trustee board has directed the AMC board to extend Puri for one year in order to facilitate the much-needed IPO, and to allow for a proper search to be conducted for the next CEO. T Rowe Price has appealed to SEBI to support the trustees, who are truly independent. We hope SEBI will act in support of the trustees. If they don’t, we believe that will send a negative message to foreign investors in India,” a T Rowe Price spokesperson told BusinessLine in an emailed response.
He further added that the company feels Puri’s performance has been stellar and UTI is one of the most profitable AMCs in the country under his management.
“During his first four years, Puri’s performance was unquestioned, and the board recognised his achievements with very good annual performance reviews by predominantly “independent’ directors,” he said.
T Rowe’s contention
T Rowe Price has contended that in the last 18 months, those directors were replaced by new directors who were nominated by three of the conflicted shareholders and five directors have now appointed one of their own as non-executive chair, “taken control of the board,” and are now seeking to change the leadership of the company.
UTI AMC declined to comment to an email query from BusinessLine .
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