UTI Asset Management Company has once again revived its plan to launch an initial public offering (IPO) and has sought approvals from the ministry of finance. The mutual fund major has been after the government to go ahead for its plans of offloading 25% shareholding in line with market regulator SEBI’s guidelines. With assets under management (AUM) of INR92,730 crore across its various schemes, UTI AMC is India’s fifth largest mutual fund player.
We are expecting a positive response on this. If we get an approval for an IPO, the dilution of promoter stake will be in line with Sebi’s minimum public shareholding norms, which is 25%
– Leo Puri, CEO, UTI AMC
In November 2014, UTI Asset Management chief executive Leo Puri was quoted as saying that the government’s approval had been sought for an IPO. No further update came on that but Puri has now reiterated that the company has not dropped the plan and is seeking ministry’s approval. This was revealed by Puri in a phone interview with the Press Trust of India (PTI). The executive is hopeful of securing an approval this time.
Puri declined to comment if the IPO would lead to an exit of its promoters and existing shareholders. Like most government financial institutions, UTI AMC is largely controlled by other state-owned financial institutions. State Bank of India (SBI), Life Insurance Corporation of India (LIC), Bank of Baroda (BoB) and Punjab National Bank (PNB) each hold 18.5% stake in UTI AMC. Original shareholding of the four promoters was reduced in November 2009 when they sold 26% stake to US-based T Rowe Price International Ltd for USD140 million (INR652 crore).
An IPO for UTI AMC is a logical step since the state-owned financial institutions have a conflict of interest by already owing separate AMCs. While SEBI rules prohibit equity interests in separate AMCs, consolidation in the industry is allowed. As a result, fund houses can acquire other AMCs. Given that UTI AMC has emerged as prized asset from its troubled past, SBI and LIC are believed to be interested in buying out other promoters and shareholders and merge UTI AMC with their regular schemes.
India’s Red Hot IPO market
The report comes at a time when several companies have approached SEBI with their plans to raise funds through primary market. Under fire for slow processing, market regulator SEBI has been prompt this year in giving approvals to companies. In the first six months of 2015, SEBI has issued observations to 21 companies to bring IPOs, taking 97 days on average to process these applications. This contrasts with just 5 approvals in the same timeframe of 2014. Ironically, SEBI took 248.8 days on average to approve IPO applications.