Sell 60% of UTI to strategic investor within a year: JPC

UTI needs to be completely restructured for which UTI Act should be repealed.’ ‘The restructured fund should be privatised by strategic sale of 60 per cent share in the sponsoring company to a private investor as suggested by the Malegam Committee,’ it said suggesting a 3-tier structure.

The remaining 40 per cent could be held by the FIs or the government with the provision that none would hold more than 25 per cent in the company. ‘The task of privatisation and choosing a strategic investor should be handled by the Department of Disinvestment, which should undertake the exercise through competitive bidding as per its existing norms,’ the JPC said, adding the privatisation should be accomplished within a year of the JPC report.

Considering UTI’s 60 per cent marketshare in mutual fund industry and the substantial equity in many companies, JPC said ‘there is a case for control over such large funds not being with single individual or group. This may be addressed by bifurcating UTI into separate AMCs—for US-64, assured return scheme and others, or for US-64, income scheme and growth schemes.’

The bifurcation of UTI would address the concern of the fund’s executive that because of its sheer size, any sale by UTI depresses the market, so it may not get the best price for its investment.