UTI Mutual weighs stake sale options

The valuation exercise for the assets of UTI Mutual Fund (UTIMF) has commenced amid difference of opinion within the finance ministry over whether to invite only the sponsor institutions to bid or go in for a global bidding process.

State Bank of India, as the lead sponsor of the fund, has written a letter to the management of UTIMF stating that the formal valuation process will start soon and that a valuer will shortly be appointed to undertake the exercise.

The plan is to sell off the assets of the fund house to the biggest bidder among the four sponsors - SBI, Life Insurance Corporation, Bank of Baroda and Punjab National Bank.

The valuation is expected to be done as fast as possible since it is felt that the current booming stock market will provide good valuation.

However, there is some conflict among the ministry officials as to whether the bidding should be restricted to only the four sponsors of the fund or whether it should be thrown open to a wider audience.

A section of the officials feel that around 51 per cent stake in the fund house should be sold off and the bidding should be open for all so that a fair valuation is received.

However, there is another more conservative and hardline view which feels that the stake sale should be only to Indian firms and that too only the sponsors.

The government has yet to take a view on how much stake should be offered to a prospective buyer. Too low a stake might not attract enough bidders, said a UTIMF insider.

Insiders, familiar with developments, said that at a conservative estimate the stake sale should fetch at least Rs 1,500 crore.

"I do not think the government would contemplate anything lower than that," said a knowledgeable source.

UTIMF now manages assets worth Rs 20,000 crore and is the largest mutual fund in the country.