Sponsors may get to bid for UTI-MF

Buyer can manage the unit as a separate entity or merge it with its asset management arm.

The government is planning to sell UTI Mutual Fund to the highest bidder among its four sponsors. The buyer will have the freedom to manage the unit as a separate entity or merge it with its asset management arm.

The four sponsors of UTI Mutual Fund are the Life Insurance Corporation (LIC), the State Bank of India (SBI), Bank of Baroda (BoB) and Punjab National Bank (PNB). The stakes are equally divided among the four sponsors.

According to sources familiar with the situation, "The idea is to create a large institution that can play an active role in the market." The process is expected to take up to a year since it also involves the valuation of the fund and related formalities.

With M Damodaran resigning as the chief of the fund on December 12, 2004, Executive Director DSR Murthy is officiating as the head. The fund currently manages assets worth around Rs 20,000 crore.

Sources said the plan would also resolve the contentious sponsorship issue and the conflict of interest since the four sponsors also had their own asset management companies.

While any of the four sponsors could get the schemes of UTI Mutual Fund, sources said LIC and SBI would be the potential acquirers, mainly because of their size.

Sources also said LIC could emerge as the favourite. This is because SBI had recently inducted SocGen as a joint venture partner for its asset management company, while LIC and its subsidiary LIC Mutual Fund are state-owned entities.

However, sources suggested that PNB could also emerge as a strong contender for acquiring the entire stake of UTI Mutual Fund since it had recently allied itself with the Principal group.

On November 30, LIC Mutual Fund had assets worth Rs 3,920 crore, SBI Funds Management Ltd had Rs 5,453 crore in assets, Principal Mutual Fund Rs 5,378 crore and Bob Mutual Fund Rs 310 crore.

Sources said till the stake sale was finalised, the government might appoint an interim head to take the fund through the sale process.