UTI Mutual Fund to divest 26% stake by March

UTI Mutual Fund to divest 26% stake by March

New Delhi: The country’s oldest fund house, UTI Asset Management Company, is likely to offload 26% stake to a strategic partner in the next three months.

The negotiation is at the advance stage and the deal is expected to be closed by February or early March, sources close to the development said.

According to sources, Japan-based Shinsei, with which the fund house has tie-up with regard to global fund management, is being actively considered to be the strategic partner.

Other US and European players, including the second largest fund house in the US America Vanguard Mutual Fund, have also shown interest in picking up strategic stake in the mutual fund, which has seen growth in its asset under management even when the sector is facing redemption pressure.

Last month, UTI Mutual Fund replaced ICICI Prudential for the third spot by witnessing increase in asset under management at a time when assets of the industry shrunk by 7%.

It has thus increased its market share to 9.54% against 8.86% in October.

The market share of the fund house is expected to cross double-digit in December as it has raised Rs300 crore from the New Fund Offer — UTI Wealth Builder Fund.

According to market analysts, even in economic slowdown it could command good valuations because of robust fundamentals and strong pan-India presence.

UTI Mutual Fund is promoted by four sponsors — State Bank of India, Punjab National Bank, Bank of Baroda and Life Insurance Corporation — holding 25% each.

The sponsors would divest a portion of their stake that would go to the strategic partner. The strategic partner is expected to add value to the business and strengthen distribution network and help upgrade technology.

The decision to divest 26% stake to a strategic partner comes five months after UTI Asset Management Company deferred its initial public offering owing to uncertain market conditions.

Even the pre-IPO placement that was intended to offload about 11% of the post diluted shares was also been put on hold. About 1.2 crore shares were proposed to be offloaded through pre-IPO placements to strategic partners.

In its draft red herring prospectus with market regulator Sebi filed in January this year, the fund house proposed to sell 4.8 crore equity shares through IPO.