Mumbai: India’s oldest mutual fund firm, UTI Asset Management Co. Ltd, has put off plans for a $480 million (Rs2,069 crore) share sale after falling stocks hit sentiment, joining other firms that have pulled or deferred offerings, six people with direct knowledge of the matter said.
The Bombay Stock Exchange’s benchmark Sensex index has registered its worst first half on record this year.
Mumbai-headquartered UTI had proposed to sell 48.5 million shares, according to an offer document filed with stock market regulator, the Securities and Exchange Board of India, on 9 January. The money manager is required to complete the initial public offering (IPO) by 21 July or restart the process, under Indian rules.
UTI, India’s fourth largest mutual fund, was not confident of a good response after the stock market slumped 23% in the past seven weeks, the longest stretch of weekly losses in seven years. The Sensex is down 32% this year.
“It’s deferred,” one person in UTI said, referring to the proposed sale.
Apart from the 48.5 million shares that will be sold through an IPO, UTI was also looking to sell an additional 16 million shares to select investors before the IPO.
ICICI Securities Ltd, a unit of India’s largest private sector lender ICICI Bank Ltd, JSW Energy Ltd and Vedanta Energy are among firms that have delayed plans for an IPO here due to a subdued market. These firms and UTI are among at least 160 companies that have delayed or cancelled IPOs worldwide this year as faltering global economic growth led investors to abandon equities.
The deferral is a blow for UTI’s owners, who can’t raise funds from selling stakes they bought in 2005.
“It is bad news for State Bank of India (SBI) and Life Insurance Corporation of India (LIC),” two of the four stakeholders, said Dhirendra Kumar, managing director of Value Research Ltd that tracks Indian mutual funds. Still, “I don’t think it is a permanent shelving, it may be just a temporary postponement.”
Khurshid Mistry, a spokesperson for UTI AMC, declined to comment Monday.
SBI, LIC, Punjab National Bank Ltd and Bank of Baroda, the four state-controlled entities that each hold 25% of the asset manager, were planning to sell 12.1 million shares, or 35% of their combined holding, said the offer document.
UTI, which manages $12 billion, had aimed to sell 49% through sale by its founders and fresh issue of shares by the asset manager in a price band of Rs270-320 a share. After the IPO and private placement, public holding in the asset manager would have been 49%, including shares held by employees trust.
“We were just not comfortable after the slide in the secondary market in the last fortnight. The pace at which it fell dented our confidence totally,” said one banker involved in the deal, who did not want to be identified because he is not authorized to speak to the media.
Bloomberg’s M.C. Govardhana Rangan contributed to this story.