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Mutual fund house UTI AMC files for IPO

UTI Asset Management Co Ltd, the country’s seventh-largest mutual fund house by assets under management (AUM), has filed a draft prospectus to float an initial public offering.

The IPO is entirely a secondary market sale of 38.98 million shares by institutional shareholders led by State Bank of India, according to the prospectus filed with the Securities and Exchange Board of India (SEBI).

The IPO size is estimated at Rs 4,000 crore ($563 million at current exchange rates) but could vary as the share sale nears, said a person familiar with the matter.

SBI has proposed to sell nearly 10.46 million shares, or an 8.25% stake. It owns an 18.24% stake in UTI AMC.

Besides SBI, insurance behemoth Life Insurance Corp (LIC) of India and state-run lender Bank of Baroda have also proposed to sell 10.46 million shares.

State-run lender Punjab National Bank and global asset management firm T. Rowe Price have each offered to sell 3.8 million shares.

The total IPO would result in 30.75% stake dilution on a post-offer basis. It may value UTI AMC at Rs 13,000 crore ($1.83 billion at current rates), VCCircle estimates show.

UTI AMC’s IPO will be the third by an Indian mutual fund company. HDFC AMC, the country’s largest mutual fund by assets, went public in August last year with a Rs 2,800 crore IPO. It sought a market value of Rs 23,161 crore in the IPO that has now soared to Rs 66,775 crore.

Nippon India Mutual Fund (formerly Reliance Nippon Life AMC), the fifth-largest mutual fund company, went public in 2017 with a Rs 1,542-crore share sale. It commands a market capitalisation of Rs 20,677.69 crore, stock-exchange data showed.

Here’s a snapshot of the proposed IPO by UTI AMC:

Use of proceeds

The company will not receive any proceeds from the IPO. The money raised will go to the respective shareholders.

Bankers

Kotak Mahindra Capital Co, Axis Capital, Citigroup Global Markets India, DSP Merrill Lynch (Bank of America Securities), ICICI Securities, JM Financial and SBI Capital Markets are merchant bankers managing the share sale.

Lawyers

Cyril Amarchand Mangaldas is the legal counsel to the company. Khaitan & Co is the legal counsel to the investor selling shareholders.

Shardul Amarchand Mangaldas & Co and Cravath, Swaine & Moore LLP are India and international legal advisers to the merchant bankers.

Company

Incorporated in November 2002, UTI AMC is India’s largest asset management company by total AUM size and seventh-largest MF house by quarterly average AUM as on September 2019.

It was the first mutual fund established in India. Its quarterly average AUM stands at Rs 1.54 trillion as on September 2019. HDFC AMC had quarterly average AUM of Rs 3.76 trillion, according to the industry body Association of Mutual Funds in India (AMFI).

UTI AMC has 11 million live folios, or a market share of 12.8% of the total Indian MF industry. Nearly 48% of its clients are domestic individual investors and 41% are corporate and other institutional investors.

It manages 178 domestic mutual fund schemes, comprising equity, hybrid, income, liquid and money market funds.

Financials

It reported consolidated net profit of Rs 208.92 crore for the six months ended September 2019 on operating revenue of Rs 474.03 crore.

Its full fiscal year 2018-19 net profit was Rs 347.9 crore on revenue of Rs 1,050.5 crore as compared with a net profit of Rs 405.09 crore on revenue of Rs 1,150.05 crore the year before.

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