Life Insurance Corporation of India (LIC) will bring down its stake in UTI Mutual Fund but won’t exit completely from UTI Mutual Fund, which is set to launch an initial public offering (IPO). “We will bring down our stake in the UTI within permissible regulatory limits,’’ said Mukesh Gupta, Managing Director, LIC.
The Securities and Exchange Board of India (Sebi) has fined State Bank of India (SBI), LIC and Bank of Baroda (BoB) Rs 10 lakh each for failing to reduce their stakes in UTI Asset management Company. These institutions, which hold 18.5 per cent stake each, will have to reduce their stake to below 10 per cent by December, failing which the regulator would freeze their excess voting rights.
According to Sebi regulations, institutions which own their mutual funds can’t hold more than 10 per cent stake in other mutual funds. SBI, LIC and BoB have their own mutual funds. LIC owns LIC Mutual Fund with assets under management (AUM) of Rs 15,000 crore. UTI’s AUM was Rs 1,33,631 crore as of June 2020.
SBI, LIC and BoB are planning to offload over 8 per cent stake each, while T Rowe Price and Punjab National Bank (PNB) will sell 3 per cent each. As PNB had sold its entire stake in its mutual fund joint venture to Principal Financial Group, the bank can hold over10 per cent in UTI Mutual Fund.
Gupta also said LIC has no problem if Axis Bank, where LIC has a significant stake, picks up stake in Max Life Insurance.
“We have a successful bancassurance partnership with Axis Bank and we are happy with that. We will continue with our stake with the Axis Bank as long as it within regulatory norms’’ he said.
Axis Bank, originally known as UTI Bank, was promoted by the erstwhile Unit Trust of India, LIC and four PSU insurers in 1993. UTI Mutual Fund was created in February 2003 following the split of Unit Trust of India after its flagship US-64 scheme collapsed.
All NAV-based schemes were transferred to UTI Mutual Fund while large equity holdings along with other assets including real estate and 25 assured-return schemes went to SUUTI (Special Undertaking of UTI). LIC cut stake its in Axis Bank below 10 per cent in the last fiscal. LIC has significant holdings in most public and private sector banks.
Axis Bank last month said it reduced the size of the stake it planned to buy in Max Life Insurance to 17 per cent from 29 per cent. The bank had originally planned to raise its stake in the insurer to 30 per cent.
LIC also owns majority stake in IDBI Bank. IDBI Bank is a major bancassurance partner of LIC and contributed nearly 49 per cent of LIC’s total bancassurance business last financial year (FY20). In the current financial year so far, notwithstanding the unprecedented challenges posed by the outbreak of pandemic, the bank has been able to generate a growth in premium of more than 80 per cent on a year-on-year basis.
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