With 74 per cent stake, the government is the largest shareholder in the mutual fund, through stakes held via four public sector institutions - State Bank of India (SBI), Punjab National Bank, Bank of Baroda and Life Insurance Corporation of India (18.5 per cent stake each).
The remaining 26 per cent stake is held by global investment management firm T Rowe Price.
An IPO could, at the least, offer a partial exit to the company's public sector shareholders. "The plans have been put on hold for now. The ministry has suggested the mutual fund should not immediately go ahead with it," said a source.
One of the sources suggested a decision could be taken after various state Assembly elections. While elections in Maharashtra and Haryana were held earlier this week, Jharkhand and Jammu & Kashmir are set to go to the polls by January next year.
The company had initially planned an IPO a few years ago. Subsequently, this was scrapped, following the global financial crisis of 2008. A fresh proposal for the IPO was reportedly given to the government earlier this year.
Around the same time, the company had begun to activate an employees' stock option scheme. Recently, the company allowed its employees to convert their stock options into shares for the first time since scrapping its IPO.
UTI is the fifth-largest fund house in the Indian mutual fund space. At the end of September, it had average assets under management of Rs 83,249.91 crore, according to Association of Mutual Funds in India data. For the year ended March 2014, it recorded a profit after tax of Rs 169.99 crore, according to the company's financial documents. Profit after tax rose 14.16 per cent compared to Rs 148.9 crore a year earlier.
U K Sinha, chairman of the Securities and Exchange Board of India, had expressed discomfort at the fact that the mutual fund's four public sector stakeholders had their own mutual funds. A single entity cannot back more than one mutual fund house, according to norms.
"Under the Sebi regulations, in the spirit of the regulation, there is, perhaps, a need to revisit this in the simple way that this was supposed to be a small short-term measure, but it has been going on for more than a decade. So, I feel the shareholders, senior management, the board of directors and the trustees should spend some time looking into those matters," Sinha had said.
A request for comment sent to UTI did not receive a reply.