UTI likely to sell 15% in AMC to global player

Partner may be international player with presence in developed markets.

UTI Mutual Fund, owned equally by Life Insurance Corporation and three public sector banks, is likely to rope in a strategic partner by offering 15 per cent equity in the Asset Management Company, ahead of its Rs 2,000 crore ($ 500 million) initial public offering (IPO).

The strategic partner is likely to be an international player, having a presence in developed markets, said sources.

According to the plans, the country's oldest fund house, which nearly collapsed at the height of the Ketan Parekh-scam of early 2000 due to bad investments in several penny stocks, plans to issue fresh shares to the strategic partner.

The strategic partner would be offered a slot on the UTI AMC board with a view to bringing in technology expertise and international knowhow, among other things.

The existing shareholders "" LIC, State Bank of India, Punjab National Bank and Bank of Baroda (they are financial investors) "" would be diluting a combined 20 per cent stake in the Mumbai-headquartered fund house during the IPO. Post-listing, UTI MF will become the first mutual fund house in India to be traded on the stock exchanges.

Shareholding by the four state-owned entities, which bought the entire government holding in 2005 by acquiring 25 per cent stakes each in UTI AMC, would come down to a combined 65 per cent after the strategic stake sale and IPO. They had bought the government's stake in the fund house in 2005 for Rs 1,236 crore "" a blockbuster investment considering that the AMC is currently valued between Rs 6,000 and 8,000 crore within less than three years.

UTI AMC has close to 8.5 million customers and it is the third biggest fund house (after Reliance and ICICI-Prudential MFs) with assets under management of over Rs 45,000 crore.

UTI AMC's MF already has a couple of international tie-ups, but no strategic partner. It has a tie-up with US-based global investment advisor Select Street Global Advisory (SSgA) for its proposed international fund. SSgA manages more than $1 trillion assets for investment advisory services.

UTI AMC recently formed a joint venture with Shinsei Bank of Japan to set up a 100 per cent subsidiary UTI International. UTI currently manages $400 million through a Japanese offshore fund "" Shinsei UTI India Fund.

Sources said UTI AMC would also be made the holding company for two its subsidiaries "" London-headquartered UTI International, which manages its offshore funds, and UTI Ventures, headed by Raja Kumar, who manages the venture capital funds.