Chirag Madia story
SBI prefers a merger, LIC mum at critical meet
While the finance ministry is pushing the shareholders of UTI Asset Management Company (UTI AMC) to take a decision on its future, no decision was taken at a critical meeting earlier this week — apart from US investment firm T Rowe Price, which owns 26% of the fund, the rest is equally held by State Bank of India, Life Insurance Corporation of India, Punjab National Bank and Bank of Baroda.
Though the UTI AMC board wrote a letter to the finance ministry requesting for permission for an IPO more than a year ago, both SBI and LIC are in favour of merging the AMC with their own AMCs. While SBI AMC is currently ranked No. 5 with assets under management (AUM) of R1,06,000 crore, it will catapult to the No. 1 rank if merged with UTI AMC, which has AUM of R1,05,000 crore. The top AMC, ICICI Prudential, has AUM of R1,74,000 crore. If LIC AMC is merged with UTI (see graphic), LIC AMC moves up to fifth position.
As FE reported last February, while SBI is in favour of offering shares to the other stakeholders in UTI AMC, LIC has offered to put money on the table. Under Sebi rules, no company can have more than one AMC, but UTI was given a special dispensation since all the four PSU banks that owned its shares ran their own AMCs. While the idea was to get the PSUs to divest their stake in UTI AMC eventually, this never happened.
At the meeting earlier this week, SBI repeated its view that UTI AMC should be merged with SBI AMC while Punjab National Bank felt that a listing would be the best way to discover the true value so that it could divest its shares.
T Rowe Price repeated its desire to go in for an IPO while Bank of Baroda said it would prefer an IPO — but should this not be feasible, a third-party valuation was a possibility so that it could divest its stake. The LIC representatives, however, did not reveal their mind, saying that this had already been communicated to the finance ministry. With this, the ball is once again in the finance ministry’s court.
While SBI has said that if its position is not accepted it is in favour of divesting its stake, it is not clear how this is to be done if there is no IPO — nor is it clear if T Rowe Price is interested in buying out the PSU institutions.
The battle over UTI AMC has been going on since April 2011, after UK Sinha stepped down as UTI chief to take on the Sebi chief’s job. At that point, the finance ministry was keen on appointing a chief that UTI’s board was not in favour of.
After manpower consultants Egon Zehnder had given a shortlist to the search committee, it had even met the finance ministry’s choice (who was not on the shortlist) but had not found him suitable.
While T Rowe Price was in favour of UTI being a board-run company after listing, the move didn’t gain traction as the PSU banks/financial institutions were not keen on this.