UTI Mutual sale hits a block over valuation

The government's plan to sell UTI Mutual Fund has hit a roadblock as the State Bank of India (SBI) is not willing to pay the amount the finance ministry is seeking.

According to sources in Delhi, SBI has valued the fund at around Rs 850-Rs 900 crore but the government wants at least Rs 1,500 crore.

SBI executives refused to comment on the issue.

The source said: "Pricing has become a major issue impeding the proposed takeover of the UTI Asset Management Company. SBI is willing to take over the assets but at its own price."

The government has set the price of the fund at 7 per cent of the total assets under management, which was Rs 22,778 crore as on July 31, 2005.

SBI was one of the sponsors of UTI Mutual Fund. The other sponsors were Life Insurance Corporation (LIC), Punjab National Bank (PNB) and Bank of Baroda (BoB). UTI Mutual Fund has the largest retail investor base and 50 per cent of its assets are invested in equities.

SBI's mutual fund arm, SBI MF, has Rs 7,200 crore of assets under management.

UTI AMC has over 35 schemes on offer, while SBI MF offers over a dozen schemes. French financial services firm, Societe Generale, has a 37 per cent stake in SBI Asset Management Company.

SBI will have to merge UTI Mutual Fund and SBI Mutual Fund at some point as the bank will not be allowed to be a sponsor in two mutual funds.

SBI chaiman A K Purwar had recently said SBI Mutual Fund was also open to acquiring another asset management company, provided it has a strong asset base.