Confident about a steady trend continuing in the Indian markets, the leading fund house has decided to go public
Mumbai: UTI Asset Management Co. Ltd, the country’s fifth largest mutual fund manager, has once again sought approval from the ministry of finance to list—a plan that the company has been toying with for years.
If approved, UTI AMC will look to offer 25% of its shares to the public, primarily with the aim to give some of the existing promoters an option to exit.
“We feel IPO is the preferred route. We have sought an approval from the finance ministry," said Leo Puri, CEO, UTI AMC in a phone interview.
On Thursday afternoon, Press Trust of India first reported that UTI had revived its IPO plan. As recently as November 2014, PTI had quoted Puri as saying that the government’s approval had been sought for an IPO but there was no further development on the proposal.
Puri said he was hopeful that UTI will get the go-ahead this time. “We are expecting a positive response on this. If we get an approval for an IPO, the dilution of promoter stake will be in line with Sebi’s minimum public shareholding norms, which is 25%," he said.
In November 2009, UTI AMC sold 26% stake to Baltimore (US)-based asset management firm T Rowe Price International Ltd, a wholly-owned subsidiary of T Rowe Price Group Inc. T Rowe Price picked up a 6.5% stake from each of the four promoters in a $140 million (around ₹ 652 crore then) transaction.
Since each of the promoters also have their own asset managment companies, it was always clear that they would eventually exit from UTI AMC to comply with the Securities and Exchange Board of India (Sebi) regulations that a single entity should not promote two separate asset management firms.
UTI AMC’s decision to revive its IPO plans come at a time when the primary markets have picked up. So far this year, eight firms have completed their IPOs, while another 22 firms have filed draft IPO papers. This includes a number of first-of-a-kind public offering such as ecommerce firm Infibeam Incorporation Ltd, the parent company of coffee chain Cafe Coffee Day, and payment services firm AGS Transact Technologies Ltd.
“Diluting promoter stakes through an IPO is not a bad idea for UTI AMC firstly because, as a brand, UTI enjoys a huge recognition in the public by virtue of having the largest number of unitholders, and secondly, there is a high possibility that unit holders who have gained from investments in UTI AMC’s mutual fund schemes through so many years in the past may well be interested to become shareholders of the company given the opportunity," said Prithvi Haldea, chairman and managing director of Delhi-based primary market tracking and analytics firm Prime Database.
Haldea added that if the pricing of UTI AMC’s IPO is right, the issue will see big interest against the current backdrop of a strong secondary market.
Once the ministry’s approval is in place, UTI will appoint merchant bankers for the IPO and file the required offer documents with Sebi, Puri said.
However, the fund house is yet to ascertain whether T Rowe Price, too, along with the four state-run promoters, will be diluting stake through the proposed IPO. “It is too premature. We are awaiting an approval from the ministry before deciding on these," said Puri.
UTI Mutual Fund was carved out of the former Unit Trust of India (UTI) in February 2003. Following a Parliamentary approval of the Unit Trust of India (Transfer of undertaking & Repeal) Act, 2002, UTI was bifurcated into Specified Undertaking of Unit Trust of India (SUUTI) and UTI Asset Management Co. UTI AMC had average assets under management of ₹ 92,730.23 crore across its mutual fund schemes during the April-June quarter.