Between March and August this year, the mutual fund industry launched 377 new schemes and raised Rs 42,015 crore from investors, according to data from the Association of Mutual Funds of India (Amfi). But, not one of them was from the stable of the country’s oldest fund house, UTI Mutual Fund.
It’s not that the fund house does not want to launch new products. It simply can’t. “According to Sebi rules, if you do not have a head, you cannot launch new products. That is one area we are handicapped in,” said a senior official from the fund house. “The managing committee is taking care of all other matters.”
The official said there had been only a few new fund offers (NFOs) of pre-approved schemes.
Even as the principal shareholders continue their search for a mutually agreeable candidate to head the five-decade-old organisation, the delay in choosing the next occupant of the corner office is beginning to show up in many other important matters, such as the publication of audited annual results in the public domain.
Most asset management companies have published their audited annual accounts for the year ended March 31, 2011, on their own websites. The details are usually also available on the Amfi website by September 30 every year. But, UTI Asset Management is yet to publish the audited results for FY11. Imtaiyazur Rahman, CFO and member of the interim management committee, UTI MF, said, “We will publish it as soon as possible.”
Inflows have been hit, as the fund house has had to sit out of the entire fixed maturity plans (FMP) boom the industry cashed in on by taking advantage of high interest rates prevailing in the market. No wonder, UTI’s average assets under management have plunged from Rs 67,188 crore in the January-March quarter to Rs 62,579 crore in the June- September quarter.
While some of this fall is due to the withdrawal of short term funds by banks following a Reserve Bank of India diktat, inability to raise funds has also contributed its bit, according to experts.
In March alone, the industry saw the launch of 134 FMPs raise Rs 27,000 crore. UTI could not participate, since U K Sinha quit as the fund house’s chairman in February to join the Securities and Exchange Board of India (Sebi), distributors said.
Rivals like Birla Sunlife launched at least two new schemes each of these months. Birla has overtaken UTI for the first time, with an average corpus of Rs 64,217 crore, this quarter.
“There has been a general slowdown in new fund launches on the equities side after Sebi measures. But on the debt side, most fund houses have been launching chains of FMPs and other closed-ended products. UTI has not been launching any new schemes,” said J Krishnan of Integrated Enterprises, a fund distributor.
Prithvi Haldea, who was till recently a director, said the audit of the annual accounts had been duly completed. “The audit was completed in July. And, the accounts have been adopted by shareholders in a meeting in September.” Haldea said he was not sure of the requirements as to the publication of results. “If there is any deviation from the usual practice, it will be rectified,” he added.
The top post at UTI AMC has been lying vacant for eight months now. Egon Zhender, a global head hunting firm, was appointed soon after Sinha quit his post as UTI chairman. But, the names it suggested did not get clearance from the shareholders. Some of the names reported to be in the race include Fidelity India's Ashu Suyash, Shailendra Bhandari of ING Vysya and Sunil Mehta of AIG.
“We have shortlisted a few names and given them to the board. But, the recommendations of the board or the consulting firm are not binding on the shareholders,” said a person involved in the selection process. He refused to give the number and names of people shortlisted, citing boardroom ethics.
US-based T Rowe Price, which has 26 per cent stake in UTI AMC, is said to be in favour of a professional CEO. State Bank of India, Punjab National Bank, Bank of Baroda and Life Insurance Corporation, which control the remaining stake, are said to be supporting the candidature of Jitesh Khosla, an IAS officer, currently serving in Assam. UTI board members are looking at various options that could be agreeable to all stakeholders.
Haldea, who was part of the HR committee, resigned last month citing personal reasons. The HR committee and some representatives from the shareholders met some prospective candidates on Saturday.
Reports also suggested a compromise formula had been worked out to have two people, a civil servant and a professional, share responsibilities at the top. “It is not an easy solution. One idea is bifurcation of the post. But, people who are quitting their plum positions elsewhere should be ready to take up such diluted roles. There might be other ideas. The key is there should be a consensus. If the majority could overrule, it would not have taken this long,” the official involved in the selection process said.
Traditionally, UTI MF had been controlled by civil servant CEOs even after the government divested its stake to the four public sector institutions. But, this is the first time the top post has fallen vacant after the entry of a strategic foreign investor. U K Sinha and his predecessor M Damodaran were both part of the IAS.
In the absence of a full-time chief, the affairs of UTI AMC are being managed by an interim committee comprised of Jaideep Bhattacharya, chief marketing officer, I Rahman, chief finance officer, Anoop Bhaskar, head-equity, and Amandeep Chopra, head of fixed income.
