The board of State Bank of India (SBI) has given the final approval for divesting its 8.25 per cent stake in UTI Asset Management Company through an initial public offering (IPO) of shares.
UTI’s four domestic shareholders — LIC, State Bank of India (SBI), Punjab National Bank (PNB) and Bank of Baroda (BoB) — hold around 18.5 per cent stake each and also have their own asset management companies (AMCs). As the crossholding rules of market regulator Sebi apply to all the four promoters, they will have to bring down the stake in UTI Mutual Fund below 10 per cent and give up board seats. US-based fund T Rowe Price holds the remaining 26 per cent stake in UTI Mutual Fund.
“We advise that the Executive Committee of the Central Board of directors (ECCB) of the Bank at its meeting has accorded final approval for divestment of SBI stake in UTI AMC up to 8.25 per cent through IPO by way of offer for sale of upto 104,59,949 equity shares, subject to the approval of the Securities and Exchange Board of India (SEBI) and/ or such other concerned authorities and departments,” SBI said in a stock exchange filing. SBI has its own mutual fund which manages assets worth Rs 320,662 crore.
UTI MF has an AUM of over Rs 154,229 crore.
Life Insurance Corporation of India (LIC) had recently invited bids from merchant bankers for disinvestment of its “stake in equity shares of an identified unlisted company through a transparent bidding process”. While LIC did not disclose the name of the “unlisted company” in an advertisement, sources said it is likely to be UTI Mutual Fund.
In March 2018, Sebi introduced crossholding limits in mutual funds to eliminate potential conflicts of interest. The regulator then mandated that if a shareholder has more than 10 per cent interest in a mutual fund, it cannot hold a similar-sized stake in another fund house and would also have to give up its board positions.
Sebi has been insisting that UTI’s four domestic shareholders will have to pare their stakes to less than 10 per cent each and rejected the requests of shareholders for extension of stake sale. “However, as UTI Mutual Fund didn’t have a chief executive, it was unable to push for an IPO through which the four promoters could have offloaded their stake. The board of the UTI Mutual Fund couldn’t appoint a full-time CEO after Leo Puri’s tenure ad MD ended last year,” said an official.
Imtaiyazur Rahman has been the acting CEO of UTI Mutual Fund for almost a year now.
UTI was set up in 1964 through an act of Parliament.