T. Rowe Price moves court over UTI MF’s shareholding
Order Sebi, govt to ensure other shareholders pare holding, T.Rowe Price tells HC
Mumbai: With less than a week to go before the end of Leo Puri’s tenure as the chief executive of UTI Asset Management Co., its single largest shareholder T. Rowe Price (TRP) approached the Bombay high court on Wednesday, seeking its intervention in the affairs of the asset management company (AMC) that it co-owns with four state-owned financial institutions.
Though T. Rowe Price is UTI MF’s biggest shareholder with a 26% stake, Life Insurance Corp. of India (LIC), Bank of Baroda (BoB), Punjab National Bank (PNB) and the State Bank of India (SBI), which hold a 18.25% each together own a commanding majority on its board.
However, as per a regulatory order issued in March 2018, no shareholder of one asset management company can own more than 10% stake in another; and those who own such stakes need to bring them down.
Such shareholders will not be allowed to be simultaneously on the boards of both asset management companies either.
Since T. Rowe Price’s partners in UTI MF have their own MF businesses, they will need to reduce these stakes.
In its writ petition, T. Rowe Price asked the court to order the Securities and Exchange Board of India (Sebi) and the Union finance ministry to direct the other shareholders to reduce their shareholding in UTI MF below 10% as required by the regulator, and extend Puri’s tenure as chief executive officer, which ends on 13 August.
“In the absence of confirming Leo Puri’s appointment for a further period of 12 months, the performance of UTI Mutual Fund shall be adversely affected and, consequently, the interest of the unit holders of UTI Mutual Fund shall further deteriorate,” the company said in its petition. “Twelve months or such other period as this court may deem fit and as required in order to enable an orderly divestment/IPO of Respondent No. 8 (UTI AMC).”
On 23 July, T. Rowe Price, among the world’s largest asset management companies with over $1 trillion assets under management, had written Sebi to intervene in the affairs of the company and had said that, “Independent directors on the board of the AMC (nominated by LIC, SBI, and PNB), without consulting TRP’s nominee directors, had the gall to challenge and oppose the decisions of the trustees, accused the trustees of being prejudiced against the independent directors, and refused to accept the directions passed by the trustees.”
TRP’s writ petition added that its past attempts to get Sebi and the finance ministry to intervene were not successful and hence it is forced to file the court petition.
“In the circumstances and being aggrieved by the various acts of omission on the part of respondent no 1 to 3 (Union of India, Ministry of Finance and Sebi) that will leave respondent No 8 (UTI AMC) headless and jeopardize the potential IPO of respondent No 8, which will result in irreparable harm to the UTI MF, and generally dilute India’s image as an investment destination,” TRP said in its petition.
T. Rowe Price spokesperson said: “Having not achieved a timely resolution, we are taking this step to prevent further harm to UTI and its stakeholders, including its 11 million unit holders. We also have an obligation to protect our long-term investment in UTI.”
The T. Rowe spokesperson also said, “we are simply asking the court to instruct Sebi and the Ministry of Finance to fulfil their supervisory responsibilities by directing the other UTI shareholders and their nominee directors to comply with regulations, the law and, more specifically, the directions of the UTI Trustee Board, all of which they have ignored.”
“Of course, if Sebi or the Ministry of Finance takes appropriate action, we would not need to pursue this petition,” the spokesperson added.
Email queries sent to UTI Asset Management Co., LIC, SBI, Bank of Baroda and Punjab National Bank were not answered.
An email and text message to a Sebi spokesperson also remain unanswered.
When UTI MF was set up, the four stakeholders were supposed to be temporary custodians. It was agreed that over time, these shareholders would exit through a share sale.
Each Indian shareholder paid around ₹312 crore in 2003-05 to acquire 25% of UTI.
Later, T. Rowe Price paid ₹162 crore to each stakeholder in 2009 to acquire a 26% in UTI AMC.
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