UTI Mutual Fund is on course to go public with an initial share sale in the second half of the next year with a valuation of over USD 1 billion and is also looking at inorganic growth to reclaim the prime position it had enjoyed before the US 64 scheme went bust in early 2001.
As and when the IPO happens, UTI will be first fund house to be listed in the country.
The IPO will allow partial exit for the nation's oldest fund house's four sponsors - SBI, LIC, BoB and PNB - which own 18.5 per cent each in it, while the remaining 26 per cent is held by US-based investment firm T Rowe Price.
"We continue to believe IPO will happen in the second half of 2017. We are awaiting Government go-ahead. Once that is in, we'll appoint merchant bankers and seek Sebi nod," UTI Managing Director Leo Puri told PTI in an interview.
UTI MF was created after Parliament passed the Unit Trust of India (Transfer of Undertaking & Repeal) Act in 2002 after the flagship US 64 scheme went belly up. Post the Act, the then mighty UTI was bifurcated into Specified Undertaking of Unit Trust of India (Suuti), which owns almost 11.8 per cent in Axis Bank and UTI Asset Management Company.
The Baltimore-based T Rowe Price picked up 26 per cent in UTI in November 2009 by buying 6.5 per cent stake each from the four promoters for USD 140 million.
"We are yet to go in for valuation as it will be discovered by the market. But we are sure of our valuation topping USD 1 billion. But the exact valuation will be determined as we go to the market for price discovery," he said, adding the issue size will depend on our shareholders.
Asked whether the company has sought the Government permission, Puri answered in the affirmative saying, "It has been pending with the Government for a long now. But now I hope that it would be coming anytime now."
From its hallowed position of No 1 fund house for decades following the US 64 crisis, UTI has now fallen to a distant sixth slot. As of end-November, its overseas AUM stood at Rs 26,000 crore. By average AUM, UTI is the sixth largest with an average AUM of Rs 1,29,888 crore in September 2016.
Asked whether UTI, which manages Rs 3 trillion assets including its global fund, has come out of the US 64 crisis, Puri said, "Of course. In the past two-three years we've come a long way" and that it is also looking at faster growth through acquisitions.
"The MF market is at an inflection point and we are keen to utilise the opportunity for faster growth. After the IPO we will be looking at inorganic growth. In fact, we hope to utilise a good portion of the IPO proceeds to faster growth, which could be driven by acquisition," Puri said.
Puri said inorganic growth model is not just limited
to buying out a fund house. But it could also mean tie-ups and also acquiring a small bank or a new commercial bank.
"We will use the IPO proceeds for inorganic growth. It is despite the fact that we are also looking at organic growth," he said, adding post-listing "we are open to look at acquiring some funds to fuel our inorganic growth in future."
Admitting that UTI has lost on the bancassurance sales, Puri said, "We are also looking at acquiring newly- created bank or a payment/small finance bank or even an microfinance firm. We believe the future lies in an open architecture as it is good for investors. If we raise primary capital then it will used for fuelling the inorganic growth."
With 1.2 crore folios (unique numbers given to MF investor), which constitute almost 23 per cent of the total in the industry, UTI is the largest player on this front.
But Puri was quick to add UTI needs to improve its retail presence. "We want to be present even in small towns. We are focusing on repositioning some of our existing funds, particularly those falling under equity funds category."
Hinting that the IPO will be a large one, he said "The larger the offering the better the quality of investors, better the quality of people who will examine the issue and do due diligence and better after-market as they are not worried about post-IPO liquidity as well.
"On the contrary, if we a narrow offering then it will confuse investors and if I've a broad offering then it will give a strong message to the market about us."
Analysts expect promoters to offload at least 26 per cent as Sebi norms don't allow a promoter to hold stake in more than one AMC. All UTI promoters have their own AMCs.
Asked whether the existing investors are happy and whether he hopes they will remain invested post-issue, Puri said "Rowe Price has been a constructive partner and if we do the listing in the right way then all the investors are likely to get attractive returns on their investments. Our earlier investors made very good returns."
Whether the large quantum of the issue will be secondary sales, he answered in the affirmative, saying "We may go in for secondary offer in the listing. But, we are also looking at a large primary market as well."
On demonetisation, Puri said it is too early to comment on the impact, but it is positive for the mutual fund industry. Since banks have a got extra liquidity in their Casa accounts some of that will be shifted to the MF savings products, he said.
Whether he expects a market rally next year, and if yes, what could be the trigger, Puri said once remonetisation is over there is a high possibility of a spending stimulus.
"So, we may see some very good numbers on the domestic front in 2017-18," he said but warned of many event-risks emanating from a Donald Trump-led US, from Britain or China.
