Shareholders agree to a ‘broad-based’ listing, formal nod awaited
A broad agreement appears to have been reached on the issue of UTI Asset Management Company (UTI’s) IPO and though the size of the issue has not been agreed to, the draft board resolution circulated to shareholders after the board meeting talks of a “broad-based” issue. Once the shareholders send their formal letters of approval to UTI, the IPO process will kick-off – in the past six years since the boardroom battles began at the mutual fund after UK Sinha stepped down as UTI chief to take on the Sebi chief’s job, it has lost its fourth position and moved current to sixth rank in terms of their assets under management (AUM).
UTI’s total assets under management (AUM) are as on October-December, 2016 quarter was around Rs 1.29 lakh crore. Currently, ICICI Prudential AMC and HDFC AMC enjoys top two position and has AUM if Rs 2.27 lakh crore and 2.21 lakh crore respectively. Reliance AMC, Birla Sun Life AMC and SBI MF is currently ahead of UTI AMC in their AUM as on October-December quarter.
In Wednesday’s board meeting, shareholders spoke of how Securities and Exchange Board of India (Sebi) rules do not allow anyone to own more than one AMC – after the US-64 debacle when State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BoB) and Life Insurance Corporation of India (LIC) were asked to buy into UTI, they were given a one-time waiver since they run mutual funds of their own.
LIC, however, is still said to be in favour of buying out the other three PSU institutions’ share. SBI which, till last year, was keen on getting control of UTI through a share swap has agreed to back the broad-based IPO. Typically in mutual fund industry valuations are based on their AUM and experts believe that with UTI they can be valued at anywhere between 5-6% of their AUM. So currently, with the AUM of October-December quarter UTI AMC could be valued at around Rs 6,450 crore.
The finance ministry, however, has indicated that it is in favour of a 10% issue for purposes of price-discovery, and a bigger sale later – this been opposed by US firm T Rowe Price which, were this to be done, would lose its 26% shareholding and hence veto power. This is critical since, in the past, there have been pitched battles with the finance ministry keen to foist its nominee as CMD of the mutual fund. It is not clear whether the ministry will change its view after the board meeting.