Schroders, Vanguard Mutual Fund and T Rowe Price have reportedly submitted bids to acquire 26% strategic stake in UTI Asset Management Company (UTI AMC), India’s oldest and fourth-largest fund house. The highest bid has valued UTI AMC at around Rs 3,500 crore ($690 million) which is around 7.3% of the assets under management (AUM), The Economic Times reported today.
UTI AMC has four shareholders State Bank of India (SBI), Life Insurance Corporation of India (LIC), Bank of Baroda (BoB) and Punjab National Bank (PNB), holding 25% stake each. It was formed six years ago when the government was forced to restructure the erstwhile Unit Trust of India, following a payments crisis. Its assured return schemes were transferred to a separate company called Special Undertaking of UTI (SUUTI), and the rest was moved to UTI AMC.
The latter’s four state-owned shareholders had acquired the firm from the government for Rs 1,250 crore. The ET report adds that each of these four shareholders will sell part of their stake to the strategic investor instead of a fresh issue of shares.
The plan to induct a strategic partner in UTI AMC was announced last year by the former finance minister P Chidambaram. UTI AMC had even toyed with the idea of a public float but this didn’t materialise as the markets turned turtle. It had originally considered a private placement followed by an IPO that would have brought down the stake owned by its four shareholders to 51%.
The shareholders had planned to raise around Rs 2,500 crore last year that would have valued the asset management firm at Rs 6,500 crore. The bids which are reportedly submitted for the strategic stake now values UTI AMC 46% lower than this.
Among those who had courted the firm earlier include Japan’s Shinsei Bank and the National Australia Bank. Shinsei has since then joined hands with private investor Rakesh Jhunjhunwala to launch a mutual fund venture in India.
There were a couple of deals involving mutual fund houses last year where Religare Enterprises bought out Lotus AMC and IDFC acquired Standard Chartered’s asset management business in India.