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UTI MF to initiate selection of bankers for IPO

Ashley Coutinho / Mumbai 10 Feb 17 | 06:13 AM

UTI AMC may soon hold a formal pitch to decide on the bankers that will handle its initial public offering (IPO).

“There have been informal talks, and a formal pitch to select bankers may follow soon," said a person familiar with the matter. The AMC has already conducted a feasibility study to gauge whether the IPO can be executed successfully or not.

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The IPO was also a topic of discussion at UTI's recently held board meeting. “The board has once again affirmed its support for UTI to be a listed entity and the AMC is seeking the necessary approvals from shareholders and the government to swiftly arrange the same," said another person, on condition of anonymity. The pitch, he clarified, is yet to get the government’s nod. 

UTI MF has five shareholders, with T Rowe Price owning 26 per cent stake in the company. SBI, Bank of Baroda (BoB), Punjab National Bank (PNB) and Life Insurance Corporation hold 18.5 per cent each.

Of these, three shareholders — T Rowe Price, PNB and BoB — had given it a ‘listing notice’ last year. A listing notice from shareholders allows it to appoint a banker and conduct a feasibility study for the IPO.

Excepting T Rowe Price, all the other four have MFs of their own. According to Sebi regulations, one sponsor cannot run two asset management companies. Listing the AMC, it is believed, will help in the resolution of the current shareholding structure, and lead to better price discovery and governance standards at the AMC.

With assets of more than Rs 3 lakh crore which includes domestic, PMS, pension and offshore assets, the AMC is looking at a valuation of about Rs 8,000 crore at this juncture.

An AMC's valuations can be based on the multiple of its earnings and the mix of assets it has. Typically, retail-oriented assets get a valuation of six-seven per cent of AUM, while institutional, or debt assets get a valuation of 2-3 per cent of AUM. In the past few years, deals in the MF industry have been valued at 4-6 per cent of average AUM. UTI has about 40 per cent of equity assets.

UTI was the number one player in terms of the assets it managed till FY06. It slipped to the number 3 position at the end of FY07, number 4 in FY09 and to number 5 at the end of FY12. At the end of December 2016, it managed assets worth Rs 1.29 lakh crore, making it the sixth largest AMC, data from sector body Amfi show.

The AMC had wanted to go public in 2008 but had to put its IPO plans on hold owing to volatile market conditions.

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