Government to add a strategic investor to UTI MF, SUUTI to offload its state in corporate majors after March 2009

In a move to spruce up the country’s fourth largest mutual fund by assets under management, UTI MF, government is planning to include a strategic investor to the MF, but this will be done without diluting the nature of existing promoters of the fund house. Accordingly, the strategic investor could hold up to 26% stake in the mutual fund.
This move of the government was indicated by the Finance Minister in a recent meeting with the board of UTI MF.

Presently LIC, State Bank of India, Punjab National Bank and Bank of Baroda are the promoters of the mutual fund house. This move is expected add enormous value and strength the flagging mutual fund house. On the possibility of the kind of strategic partner, UK Sinha, the chairman and managing director of the fund housed, said that it could be a very big distributor or a very big investor in India from abroad or a large group.

The fund house has also deferred its proposed and much awaited IPO, and therefore also its pre-IPO placement. In March 2008, market regulator SEBI had given its approval to UTI MF for its IPO, but the fund housed had to put its IPO plans on hold due to extreme volatility in the markets then.

Among other developments, the Finance Minister said that the residual stake held by the Specified Undertaking of UTI (SUUTI) in corporate majors L&T and ITC will be transferred to the government after March 2009 when the undertaking is scheduled to be wound up. SUUTI was formed well over four years ago after the erstwhile UTI Mutual Fund was bifurcated into two in 2003-04, following a major crisis.

All assured return schemes and other assets and liabilities were transferred to the new entity SUUTI with objective that once all liabilities to the unit holders were finished, the undertaking could be wound up. While many schemes have been redeemed, some of the assets in the form of the shareholding in L&T and ITC are yet to be sold mainly because of the resistance from the entrenched managements. Meanwhile, the board of SUUTI has appointed ICICI Securities, JP morgan and Citigroup as the bankers to sell a part of the 27% equity holdings it controls in Axis Bank, the third-largest private bank in India.