UTI Asset Management Company (AMC), India’s oldest fund house with assets under management (AUM) of Rs 38,358 crore, is in advanced talks to divest a 26% stake. Those in race include financial services giant T. Rowe Price, Shensei Bank of Japan, Vanguard Mutual Fund, etc according to reports. According to this report, UTI AMC is expected to command a valuation of between Rs 6,000 crore and Rs 7,500 crore, with buyer paying anywhere between Rs 1,500-1,800 crore.
UTI AMC was planning a Rs 2,500 crore initial public offer (IPO) in January this year, which was shelved due to the stock markets meltdown. After that UTI AMC has been looking for a strategic partner. Also since last December last year, the AUM of UTI AMC has fallen from Rs 56,854 crore to Rs 38,358 crore.
The deal does not involve expansion of share capital but divestment by four sponsors in proportion. The four sponsors – State Bank of India, Punjab National Bank, Bank of Baroda and Life Insurance Corporation of India – hold 25% each in the AMC.
This development comes at a time when mutual fund houses are seeing assets under management fall and there are distress sales happening in the market. Ranbaxy Group’s asset management arm Religare Aegon acquired Lotus India Asset Management Company last month. The deal happened at 1-2% of the average assets under management (AAUM), as against the in industry norm of 5-7%. Even LIC has bailed out its mutual fund house LIC Mutual Fund Asset Management Ltd. It has reportedly bought illiquid debt paper, largely of real estate firms, worth at least Rs1,755 crore from LIC MF.
UTI AMC is expected to command “decent” valuations even in this market as it’s one of the most profitable fund houses in the country and posted Rs 147 crore net profit last fiscal year.