Markets

UTI AMC promoters likely to seek more time to divest stake

Suresh P Iyengar K Ram Kumar Mumbai | Updated on November 28, 2018

Stake could be undervalued if Bank of Baroda, SBI, LIC and PNB offload 32.96% at one go

With the stock market turning choppy in the last few months, UTI Asset Management Company’s four key promoters – State Bank of India, Life Insurance Corporation of India, Bank of Baroda and Punjab National Bank – are likely to seek more time from the market regulator to cut their individual stake to 10 per cent in India’s oldest mutual fund.

The four state-owned entities, which have their own mutual funds, have 18.24 per cent stake each in UTI AMC. T Rowe Price International Ltd holds 26 per cent stake.

As per SEBI regulation on mutual funds, no sponsor of a mutual fund can directly or indirectly have 10 per cent or more of the shareholding (cross-holding) or voting rights in the AMC or the trustee company of any other mutual fund; also, it cannot have representation on the board of the AMC or the trustee company of any other mutual fund.

Markets choppy

In the current volatile market scenario, if the four state-owned entities were to dilute their stake at one go, collectively offloading 32.96 per cent stake (8.24 per cent each), the fear is that their stake could be undervalued, said a source versed with developments on this front.

The expectation, according to the person quoted above, is that the market regulator SEBI (Securities and Exchange Board of India) may allow partial divestment of stake in UTI AMC by the four promoters before March 2019, thereby setting the ball rolling on meeting the norm relating to cross-holding.

SBI and LIC, in a representation to SEBI and the Department of Investment and Public Asset Management, wanted T Rowe Price International to dilute its stake in UTI AMC. But SEBI Chairman Ajay Tyagi told BusinessLine in August that cross-holding norms apply only to domestic firms that have conflicting business interests in India.

As on October-end 2018, UTI AMC had average assets under management (AAUM) aggregating ₹1,57,139.41 crore.

Of this, ₹99,672.51 is under income/debt-oriented schemes; ₹39,001.41 crore in equity / growth-oriented schemes; ₹12,496.64 crore in exchange-traded funds; and ₹5,968.85 crore in balanced schemes.

After Leo Puri demitted office as Managing Director in August 2018, Imtaiyazur Rahman, Group President and CFO, took charge of UTI AMC as acting CEO with effect from August 14.

The AMC has formed a screening committee, comprising three of its board members, to zero-in on a suitable candidate to occupy the corner office.

Published on November 28, 2018

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