India: UTI AMC Plans To Launch Its $408m IPO Next Week

Mutual fund manager UTI Asset Management Co. Ltd (UTI AMC) is planning to launch its ₹3,000 crore initial public offering (IPO) in the week of 14 September, as the company’s existing shareholders look to tap the recovery in the IPO market.

“The plan is to launch the deal in the week of 14 September, though final dates are yet to be frozen as there is a lot of supply hitting in the IPO market this month,” said a person who is advising the company on its IPO plans, requesting anonymity as he is not authorized to speak with the media.

The mutual fund manager’s plan to launch its share sale comes at a time when the IPO market is seeing a revival in activity. Several other companies are also planning to hit the IPO market this month. Two companies, Happiest Minds Technologies Ltd and Route Mobile Ltd, have already announced the dates for their initial share sale.

The UTI AMC spokesperson declined to comment.

The IPO also comes at a time when India’s equity mutual fund schemes saw a net outflow in July, a first in over four years, as investors redeemed holdings amid a rally in stock markets from the pandemic-induced lows hit in March.

According to data from Association of Mutual Funds in India on Monday, there was a net outflow of ₹2,480.35 crore in July, the first sell-off since March 2016.

The UTI AMC share sale is critical for its shareholders, given the regulatory need to reduce their stake in the asset manager.

Three primary stakeholders of the company–LIC, SBI, and Bank of Baroda–in compliance with Sebi norms have to reduce their stake to 10% by December.

In an order on 6 December, 2019, the market regulator directed LIC, SBI and BoB to reduce their stake by December 2020, failing which, the regulator would freeze their excess voting rights.

LIC, SBI and BoB were to divest their stakes in two phases—a 25% divestment of the stake by all institutional shareholders on pro-rata basis by way of an initial public offering (IPO) and 10.92% divestment in the second phase through a follow-on public offer.

In the first phase the three lenders would offload 8.25% stake each, while T Rowe Price and Punjab National Bank will sell 3% each. T Rowe Price is a majority shareholder with a 26% stake in UTI AMC, while PNB holds 18.24%.

The three public sector financial institutions hold 18.24% each in the firm. Sebi’s cross holding norms for mutual funds says the sponsor of an AMC cannot hold more than 10% in another.

Last month, markets regulator Securities and Exchange Board of India penalized three state-owned financial companies, including State Bank of India (SBI), Life Insurance Corporation of India (LIC) and Bank of Baroda (BoB), charging them with a fine of ₹10 lakh each, for failing to reduce their stakes in UTI AMC.

This article was first published on livemint.com