The battle between UTI Asset Management Company’s largest shareholder T Rowe Price and four government-owned financial institutions is set to intensify with UTI’s board to meet later on Wednesday to appoint former Life Insurance Corporation chief D K Mehrotra as the AMC’s non-executive chairman. The US-based T Rowe Price holds 26% of UTI AMC’s shares while LIC, State Bank of India, Bank of Baroda (BoB) and Punjab National Bank (PNB) hold 18.5% each.
Mehrotra has managed to get the approval of the government-owned FIs but has not got T Rowe Price’s approval. A letter to UTI signed by LIC MD Sushobhan Sarker says the proposal has the approval of SBI’s managing director S Vishvanathan, PNB’s CMD KR Kamath and BoB’s CMD SS Mundra.
The tussle for UTI’s top job — at that time the chairman and managing director’s jobs were merged into one — goes back to April 2011 when LIC, SBI, BoB and PNB backed the finance ministry’s choice —Jitesh Khosla. An IAS officer, Khosla is the brother of the then finance minister’s advisor. T Rowe Price refused to back down since professional search firm Egon Zehnder selected by a human resources subcommittee of the board had not put Khosla on its shortlist after interviewing candidates from across the world for the job. Nor was Khosla recommended by the HR subcommittee that interviewed him for the job despite him not being on the shortlist.
The shadow-boxing went on for two years and persisted even after LIC mooted a proposal to split the UTI chief’s job into two, which would allow the hiring of a professional as the full-time managing director. While McKinsey veteran Leo Puri was selected for the MD’s job after yet another round of interviews, the state-owned financial institutions managed to oppose this by pointing out that Puri did not meet the qualifications put out in the advertisement for the UTI MD’s job since he was neither a chartered accountant nor an MBA. Puri was finally confirmed as MD in July this year after yet another round of interviews.
The tussle over appointing Mehrotra as chairman comes at a time when the government also has to move to make UTI AMC compliant with Securities and Exchange Board of India norms that stipulate no company can run more than one AMC. LIC, SBI, BoB and PNB all have their own AMCs and, over a period of time, need to divest from UTI AMC for it to be Sebi-compliant.
LIC had put in a proposal to merge UTI AMC with its AMC but this was turned down by the finance ministry.
Over the time that UTI remained without a CEO — Puri’s appointment was confirmed more than two years after UK Sinha, CMD, moved to Sebi as chairman — it slipped from being the fourth largest fund to the fifth largest. In the year to March 31, 2013, UTI AMC’s net profit rose 11% from a year earlier to Rs 149 crore.
Mehrotra served as the acting chairman at LIC between May 2011 and May 2012, after which he was appointed as chairman up to May 2013, before he retired. A career LIC official, Mehrotra spent 36 years working at the insurance company. He is currently on the boards of ITC, Tata Steel and Multi Commodity Exchange as an independent director.