New Delhi: The over 150-year-old Tata Group could soon pick up a majority stake in India’s eighth-biggest mutual fund, UTI Asset Management Co (AMC). The conglomerate is in final discussions for the stake, which it would buy from four state-owned financial entities – Punjab National Bank, Life Insurance Corporation of India, State Bank of India and Bank of Baroda.
PNB, SBI, LIC and BOB together have a 45.16 per cent ownership in the country’s eight largest mutual fund. The combined entity, if the deal is successful and Tata AMC and UTI AMC are merged, would become India’s fourth-largest asset management company. Tata’s deal is in the final stages and an agreement on the valuation is being sought, people privy of the development told Economic Times.
SBI AMC, ICICI Prudential AMC and HDFC AMC are the top three managers in India, as per the data from Amfi.
Tata looks at big stake in UTI AMC
Internal consents for the deal are in and the Tata Group has also got in-principle nod from the other big investor in the AMC – global investment management firm T Rowe Price Group – which has a 23 per cent stake in it, according to officials in the know of it.
Tata AMC’s ownership, on the other hand, is such that Tata Sons and Tata Investment Corporation own 68 per cent and 32 per cent, respectively.
UTI AMC stock jumps!
UTI AMC, listed in October 2020, stock surged over 12 per cent on Monday after reports suggested Tata’s interest in it. As of Friday’s close, it had a market capitalisation of Rs 9,791 crore. The Tata Group will have to shell out around Rs 4,400 crore for a 45 per cent ownership in the MF at the current market price and another Rs 2,500 crore for the 26 per cent mandatory open offer.
UTI AMC’s assets under management (AUM) on September 30 were Rs 2.34 lakh crore or about 6 per cent of the total AUM. Tata AMC, the 12th biggest in terms of AUM, managed assets of Rs 91,284 crore on September 30.
Read More: Best Small Cap Funds (December 2022): Top-performing schemes since inception
PNB, LIC, SBI, BOB reduce stake in UTI AMC
Worth mentioning here is that public lender PNB had earlier this year shared its desire to monetise its non-core assets which includes selling its stake in UTI AMC. In October 2020, the bank had sold 3 per cent stake in UTI AMC for about Rs 180 crore, which reduced its stake to 15.22 per cent.
Three years ago in December 2019, market regulator SEBI had also instructed LIC, SBI and BOB to bring down their stakes in UTI AMC by December 2020. These three public sector financial institutions held 18.24 per cent each back then, while Sebi’s cross-holding norms for mutual funds do not allow the sponsor of one AMC to hold more than 10 per cent in another.
Subsequently, LIC, SBI and BOB had slashed their stakes in UTI AMC to less than 10 per cent during the IPO in October 2020.
