LIC & three banks to sell stakes in UTI AMC issue

Life Insurance Corporation of India along with three major banks State Bank of India, Punjab National Bank and Bank of Baroda will jointly divest 50% of their holdings in UTI Asset Management (UTI AMC) in the forthcoming IPO of the fund house.

As per the current scenario, the divestment of just half of their original equity holding in the AMC will enable these entities to bring out well over Rs 1,236 crore. This is the amount they paid to the government to take control of the firm in 2005. The sponsors can hope to capitalize on further gains after the listing. A official associated with the transaction has said that the dilution of their holding will be restricted to 50% now as UTI AMC has to maintain its PSU character marked by it being controlled by state owned entities in order to manage the new pension scheme.

The proposal, which is now awaiting the approval of the finance ministry, envisages the four sponsors of the asset management company diluting their individual stake by 12.5% each through an offer of sale in the IPO of UTI AMC. A clause in the agreement between the four sponsors of UTI AMC and the government dating back to 2005 makes it mandatory to seek the approval of the finance ministry before any change in ownership is done. The proposed listing of the AMC will be a first in the local markets

UTI AMC has assets under management of over Rs 40,000 crore. Besides, it has a venture fund firm based in Bangalore, manages portfolio investment for overseas investors and an India dedicated offshore fund in London. Taking all these into account the valuation could help the sponsors encash more than their original capital investment. The profits of the fund house were estimated to be close to Rs 150 crore during the last fiscal.