UTI AMC sponsors’ tiff continues
LIC writes to Dipam saying IPO may be delayed as T Rowe Price is not cooperating; US fund house hits back
Despite the Centre’s intervention, UTI Asset Management Company’s (AMC’s) principal sponsors continue to be at loggerheads. According to sources, Life Insurance Corporation (LIC) has written to the finance ministry’s divestment wing – Department of Investment and Public Asset Management (Dipam) – stating that the fund house’s initial public offering (IPO) is not likely to be rolled out in the near term.
It alleged that UTI AMC’s foreign sponsor T Rowe Price is not following the board decisions such as initiating the process to appoint a new managing director and chief executive officer (MD and CEO).
“The foreign fund house is not vetting a board proposal to start the selection process for appointing MD and CEO. This could result into a further delay in the I PO process. This delay could hurt public sector banks, who are planning to divest their stake to raise money,” said a government official privy to the development.
Denying the allegation, T Rowe said that its representatives on the UTI AMC board are participating in the search process for MD and CEO. In an email response to Business Standard, it said that it fully supports the IPO initiative.
“We have been fully supportive of the IPO of UTI MF for several years as the best solution for the company and for the ‘conflicted’ Indian shareholders who have to be in compliance with Sebi’s Mutual Fund Regulation by March 2019. We have recently reiterated our view to the finance ministry, which is yet to give its approval of an offering. It is our understanding that the company is preparing for an IPO but has not yet received support from all the Indian shareholders,” said Craig Smith, vice-president and head of corporate communications at T. Rowe Price.
Amid escalation of the controversy, domestic shareholders have moved the Securities and Exchange Board of India (Sebi) seeking more time to comply with the cross holding norms. The four domestic shareholders also want T Rowe Price to pare its holdings in UTI AMC.
Sources said Se bi doesn’ t see any merit in the domestic shareholder’ s demand, as the foreign fund house does not have crossholding in another of its counterparts in India. All the domestic shareholders operate separate mutual funds. Earlier, T Rowe Price had moved court against the AMC’s board and domestic sponsors, seeking government intervention in the matter.
In its petition, T Rowe Price had informed the Bombay High Court in August that four public sector undertakings – LIC, State Bank of India (SBI), Punjab National Bank (PNB) and Bank of Baroda (BoB) – were trying to stall the company's proposed IPO.
The petition had also sought implementation of Sebi’s rules and regulations and to extend the term of former MD and CEO Leo Puri for another year to see the IPO through. T Rowe alleged that the four PSUs, which together own 74 per cent in UTI AMC, are not in favour of granting Puri a second term.
The petition had also sought Sebi’s help in asking the four domestic shareholders to bring down their holding in the fund house to 10 per cent each from the current 18.50 per cent.