UTI AMC board clashes over CEO appointment

The stand-off between principal shareholders of UTI Asset Management Company (AMC) has escalated over the appointment of managing director (MD) and chief executive officer (CEO).

The largest shareholder, T Rowe Price group, wants current chief Leo Puri to continue, while the other four domestic shareholders led by Life Insurance Corporation (LIC) are keen on appointing a new CEO. Puri’s five-year tenure ends in August.

According to sources, the markets regulator Securities and Exchange Board of India (Sebi) has intervened in the matter, directing the fund house to follow the proper appointment process with performance analysis.

Sources add the domestic shareholders of the country’s sixth-largest fund house have chalked out selection criteria for the appointment process; however, the US-based fund house has refused to give its consent.

T Rowe Price, which holds a 26 per cent stake in the UTI AMC, is disappointed that the UTI MF board is not in favour of continuity in the leadership at the fund house. The global asset manager is of the view that the fund house needs stability ahead of a planned initial public offering (IPO).

“Leo Puri has done a stellar job managing UTI MF since being appointed as managing director in 2013. We are very supportive of having him continue in this role. Having strong management in place is essential to protecting the interests of UTI AMC and its stakeholders, including the millions of fund unit-holders. It will also put the company in the best position to move forward with the planned IPO,” a T Rowe Price spokesperson told Business Standard. An email sent to UTI MF remained unanswered.

A section of the board, including independent directors, doesn’t share similar views. Sources say the representatives of the public sector stakeholders are of the view that UTI MF’s performance has been on a downward spiral since Puri has taken charge. Further, the fund house has lost market share as the growth in its asset base has been below the industry growth rate.

UTI AMC's market share stood at 6.6 per cent for the June 2018 quarter. It was 8 per cent four years ago. Sources say that these board members have already initiated the appointment procedure and said to have proposed to finalise a new CEO within a week’s time, said a person privy to the development.

The standoff between the stakeholders of UTI MF comes at a time when they have to address the cross-shareholding issue raised by Sebi. As per the market regulator, an entity can’t own over 10 per cent stake in more than a single fund house. UTI MF’s four public sector sponsors – LIC, State Bank of India, Bank of Baroda and Punjab National Bank — each have their separate MF arm. Each of them holds 18.5 per cent stake in UTI MF, while the remaining 26 per cent is with T Rowe Price.

When UTI MF was set up, the four stakeholders were the temporary custodians. It was envisaged that over time these shareholders would exit through the IPO route. In the past, LIC had proposed to buyout stakes of the other three domestic shareholders and subsequently merge UTI MF with its own MF arm LIC MF.