The finance ministry has agreed to issue a no-objection (NOC) letter for UTI AMC’s initial share sale, and direct state-run financial institutions to cut their stakes in the local asset manager.
The US fund manager T. Rowe Price withdrew its writ petition against the government, the Securities and Exchange Board of India and other UTI AMC shareholders after it was satisfied with the assurances given by finance ministry officials at a meeting in early August, according to sources.
Accordingly, the government will ask Life Insurance Corp. of India (LIC), State Bank of India (SBI), Punjab National Bank (PNB) and Bank of Baroda (BoB) to slash their stakes in UTI AMC from 18.25% to 10% each, within a deadline. T. Rowe Price owns 26% in UTI AMC, but the four government institutions together command a majority on its board.
Rowe Price approached the Bombay high court on 8 August, seeking its intervention to force the four state-run institutions to reduce their stakes as mandated by the stock markets regulator, and order the continuance of its chief executive, Leo Puri. On 28 August, it withdrew the petition.
“The government has said this time that it will work out a plan favourable for all stakeholders and the AMC. The government will direct the four public sector sponsor-cum shareholders (who have their own separate in-house AMC businesses) to reduce their stakes in UTI AMC in the next three months, definitely by end of March 2019,” said the first person.
UTI AMC is likely to come out with a Rs.5,000-crore IPO.
“The total offer to the public in the IPO could be around 40% at an estimated size of Rs. 5,000 crore, if we go by the calculation done by ICICI Securities Ltd. which was appointed by UTI AMC as a banker for its proposed IPO,” said the second person.
It was in July 2007 that UTI AMC got its first board approval for an IPO. In January 2008, the AMC, the second largest then, filed a draft prospectus with Sebi, proposing to offer 48 million shares to raise Rs. 1,800-2,400 crore. Just two months later, it deferred the plans as stocks tanked, hurting its valuations.
In September 2008, US-based investment bank Lehman Brothers Holdings Inc. collapsed, sending world markets into a tailspin, forcing UTI AMC to shelve its IPO plans.
In November 2009, T. Rowe Price Global Investment Services Ltd bought a 26% stake in UTI AMC for $140 million (around Rs. 652 crore), valuing UTI AMC at about 3.25% of its average assets under management at the time.