PSU behemoth SBI’s mutual fund arm has evinced interest in acquiring the country’s oldest fund house UTI MF — a deal that could create the country’s biggest mutual fund with assets in excess of Rs 1.5 lakh crore.
The deal, if it happens, would also be the biggest ever M&A transaction in the Indian mutual fund industry, which has over 45 players together managing Rs 11 lakh crore. There have been a few M&A deals, but mostly involving smaller players.
UTI MF at present is the fifth largest fund house of the country, while SBI MF ranks sixth.
Sources said that SBI has moved a proposal to the Finance Ministry that its subsidiary SBI Mutual Fund can acquire UTI Mutual Fund.
The issue is currently being discussed by the concerned departments, they added.
Interestingly, SBI is also one of the four sponsors of UTI Mutual Fund.
UTI MF was carved out of the erstwhile Unit Trust of India (UTI) in February 2003. At that time, UTI was bifurcated into Specified Undertaking of Unit Trust of India (SUUTI) and UTI MF.
UTI Mutual Fund is promoted by the four of the largest public sector institutions — SBI, LIC, Bank of Baroda and Punjab National Bank, with each of them presently holding a 18.5 per cent stake.
US-based T Rowe Price had has acquired a 26 per cent stake in UTI Asset Management Company Limited, which runs UTI MF.
If a deal goes through for UTI MF’s acquisition by SBI MF, the merged entity can overtake HDFC Mutual Fund as the country’s largest fund house.
Currently, UTI MF has average asset under management of Rs 87,390.13 crore, while that of SBI MF was Rs 72,140.63 crore at the end of 2014.
Sebi Chairman UK Sinha has been saying that there is a case for consolidation in the asset management industry due to presence of some non-serious players.
Last year, HDFC Mutual Fund acquired its smaller rival Morgan Stanley Mutual Fund running a total of eight schemes with assets worth Rs 3,290 crore, in a major consolidation exercise in the highly-dispersed sector.
HDFC Mutual Fund, country’s already largest fund house, has Assets Under Management (AUM) of well above Rs one lakh crore.
In 2008, UTI Asset Management Company deferred its IPO owning to uncertain market conditions. The fund house had proposed to sell 4.8 crore equity shares through IPO.
Subsequently in 2009 all the four sponsors of UTI diluted 6.5 per cent each in favour of T Rowe Price.