Even as UTI Asset Management Company (AMC) awaits a clearance from the government for an initial public offer (IPO), two of its shareholders, State Bank of India (SBI) and Life Insurance Corporation of India (LIC) are looking to buy out the assets of the country’s fifth-largest fund house. While SBI is understood to have said it would offer the other stakeholders shares of the bank in lieu of their holdings, LIC, it is believed, has offered to put money on the table.
SBI and LIC along with Punjab National Bank and Bank of Baroda hold 18.5% each in the AMC, while the remaining 26% is with T Rowe Price, a stake it had acquired in January 2010. When asked, LIC said it had no comments to offer while an email sent to SBI did not elicit a response.
If SBI manages to acquire UTI AMC, the combined assets would be close to R1.59 lakh crore, higher than market leader HDFC AMC’s R1.50 lakh crore.
The UTI AMC board has written a formal letter to the government requesting permission for an IPO. The fund house had wanted to go public in 2007-08 but the plans were shelved following the slump in the markets and economy.
Leo Puri, MD at UTI AMC, told FE the company had made a proposal for a listing because it believed “that would help give impetus to our desire to emerge as a professional meritocracy that is board-governed”.
Puri believes there are significant benefits from being an listed entity. “It does help to have a group of shareholders and board-governed entity which puts you under transparency and bring firmly under capital markets companies Act regulation. We liked to create a corpus that we would like to grow our business, not just acquisition but even organic growth requires capital. I don’t have a parent that will downstream cash if need, so I need go to market and feel independent and strong. It will be also opportunity to unlock material value for existing shareholders and that’s an important issue as well,” Puri said.
According to data from the Association of Mutual Funds in India, UTI AMC’s average assets under management (AAUM) in the October-December quarter of 2014 stood at R87,390.13 crore. According to experts, UTI AMC might be valued at 4-6% of its AAUM and based on the parameters, the valuation stands at around R3,500 crore to R5,200 crore. Typically, fund houses with a high share of equity assets attract a valuation of 5-7% of the total assets, while those with more debt command 2-3%.
However, UTI AMC has strong brand value, equity assets of over R37,870 crore and debt assets of R49,520 crore. SBI AMC has AAUM of R72,140.63 crore while LIC, which has roped in Nomura as a partner, had an AAUM of R7,618.49 crore.
UTI Mutual Fund was carved out of the erstwhile Unit Trust of India (UTI) as a Sebi-registered mutual fund from February 1, 2003. The Unit Trust of India (Transfer of Undertaking & Repeal) Act, 2002, was passed by Parliament, paving the way for the bifurcation of UTI into Specified Undertaking of Unit Trust of India (SUUTI) and UTI Mutual Fund (UTIMF). T Rowe Price’s 26% stake in UTI AMC was valued at around R650 crore, or 3.2%, of its AAUM.
* While SBI is offering the other stakeholders shares of the bank in lieu of holdings, LIC has offered to put money on the table
* If SBI acquires UTI AMC, the combined assets would be close to R1.59 lakh crore, higher than market leader HDFC AMC’s R1.50 lakh crore
* SBI and LIC along with PNB and BoB hold 18.5% each in the AMC, while the remaining 26% is with T Rowe Price, a stake it had acquired in January 2010