GLOBAL BIGGIES LINE UP FOR UTI AMC’s 26% PIE

Schroders,Vanguard,T Rowe Price Submit Bids; Fund House Valued At Rs 3,500 Cr

THE offer of a 26% strategic stake in UTI Asset Management Company (UTI AMC) has attracted bids from three overseas suitors, with the top bid valuing the country's oldest and fourth-largest fund house at as much as around Rs 3,500 crore, two people familiar with the matter told ET.
    The three suitors — Schroders, Vanguard Mutual Fund and T Rowe Price — recently submitted their "indicative valuation bids", which range between 5% and 7% of the total assets of more than Rs 48,000 crore being managed by UTI AMC, said one person with intimate knowledge of the sale process.
    "The shareholders are contemplating the valuations and getting the required approvals from their end," the second person said. UTI's four shareholders include State Bank of India (SBI), Life Insurance Corporation of India (LIC), Bank of Baroda (BoB) and Punjab National Bank (PNB), which own 25% each.
    A senior official with UTI AMC, who asked not to be named, said the company was in talks with its prospective suitors and refused to divulge details.
    A dominant player in India's stock markets for decades, UTI AMC was formed in 2003 when the government was forced to restructure the erstwhile Unit Trust of India, following a payment crisis. All its assured return schemes were transferred to a separate company called Special Undertaking of UTI (SUUTI), and the rest to UTI AMC. Its four shareholders, all of them stateowned companies, subsequently bought out the government's stake in the fund house for Rs 1,250 crore.
    The sale of a 26% stake will not involve the issue of fresh equity, and each shareholder will offer a small part of his holding to the strategic partner on a proportionate basis. The partial sale of their holdings will help the four investors book profits and raise funds to bolster their balance sheets.
    The plan to induct a strategic partner in UTI AMC was announced last year by the then finance minister P Chidambaram. The fund house had originally considered a private placement followed by an initial public offering, which would have resulted in the stake of its four shareholders collectively coming down to 51%. However, that plan was abandoned due to adverse market conditions.
    UTI AMC and its four shareholders had originally planned for the IPO and the private placement to raise around Rs 2,500 crore last year, at an implied valuation of around Rs 6,500 crore for the entire company.
    That plan was dropped, following the stock market meltdown and replaced by the plan to induct a strategic partner. Foreign companies, including Japan's Shinsei Bank and the National Australia Bank, were said to be interested in acquiring the strategic stake at one point. However, Shinsei dumped its plan and instead joined hands with leading private investor Rakesh Jhunjhunwala to launch a mutual fund venture in India. Strategic partner may help UTI AMC expand footprint
ROPING in a strategic partner could help UTI AMC to expand its business both in the domestic and international markets. The fund house posted a net profit of Rs 147 crore for the year to end-March 2008, and industry analysts say the firm could command decent valuations because of its profitability, its equity bias and a strong pan-India presence.
    The plan to sell a strategic stake in UTI AMC comes amid rising consolidation in the Indian fund management sector.
    Late last year, Delhi-based financial services company Religare Enterprises bought out Lotus AMC. Also last year, Infrastructure Development Finance Company (IDFC) acquired Standard Chartered's asset management business in India for $205 million in an all-cash deal. That deal worked out to 5.67% of StanChart AMC's total assets under management of Rs 14,141 crore at the end of February.