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UTI MF itemizing to finish Sebi, sponsors’ decade-old tussle

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(This story initially appeared in on Oct 12, 2020)

The itemizing of UTI Mutual Fund (UTI MF) on Monday is about to finish the greater than a decade-old chilly conflict between markets regulator Sebi on the one aspect and three government-run monetary powerhouses — Life Insurance Corporation (LIC), State Bank of India (SBI) and Bank of Baroda (BoB) — on the opposite. For years, Sebi was not comfy that these establishments had their very own mutual fund arms and, on the identical time, additionally held substantial minority stakes in UTI MF, the nation’s oldest fund home.

The stakes had been entrusted to those three entities, and in addition to Punjab National Bank (PNB), within the early 2000s after the erstwhile Unit Trust of India was bifurcated. Each of those entities was holding 25% then. In 2010, US fund administration main T Rowe Price acquired 6.5% from every of the shareholders to turn out to be the biggest stakeholder with a 26% share.

In August this 12 months, Sebi had even fined these three entities Rs 10 lakh every for holding greater than 10% stakes in UTI MF and restricted a few of their shareholder rights. The legislation didn’t permit an entity to carry greater than 10% in a couple of fund home.

This rule was introduced in 2018. Prior to that too, on a number of events, Sebi had despatched feelers to the 4 entities to scale back their stake in UTI MF. Only PNB had bought off its fund administration enterprise to its overseas JV associate, Principal Financial Group, in 2018. The remaining three continued to have fund administration companies by which every held greater than 10% stake.

With UTI MF’s itemizing, the stakes of LIC, SBI and BoB will come right down to under 10% — the regulatory threshold. LIC, SBI and BoB is not going to have the suitable to appoint any administrators to the UTI MF’s board, which may have 14 members.

The present board members, nonetheless, will proceed to serve their full time period and never resign because of the post-IPO shareholding rejig. After the IPO, T Rowe Price may have the suitable to appoint two members to the board, whereas PNB will nominate one. In the wake of the IPO, UTI MF might be a very professionally managed fund home, mentioned a prime firm government.

On October 1, the Rs 2,160-crore UTI MF IPO closed with a subscription of two.three occasions. The shares had been allotted at Rs 554 per share. Going by the gray market premium, the itemizing for India’s oldest fund home is anticipated to be a lacklustre one with the prospect of its share worth even dipping under its supply worth on its inventory market debut, merchants mentioned.

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