Page 20 - Banking Finance September 2018

MUTUAL FUND

Sundaram MF launches Govt nod to Rs. 5,000 crore UTI AMC IPO
Sundaram Services Fund The finance ministry has agreed to issue a no-objection (NOC) letter for UTI
AMC's initial share sale, and direct state-run
financial institutions to cut their stakes in the
local asset manager.

The US fund manager T. Rowe Price withdrew
its writ petition against the government, the
Securities and Exchange Board of India and
other UTI AMC shareholders after it was satis-
Sundaram Mutual Fund has launched fied with the assurances given by finance min-
a new fund offer (NFO) called istry officials at a meeting in early August, according to sources.
Sundaram Services Fund. The open- Accordingly, the government will ask Life Insurance Corp. of India (LIC), State
ended equity mutual fund is open for Bank of India (SBI), Punjab National Bank (PNB) and Bank of Baroda (BoB) to
subscription and closes on Septem- slash their stakes in UTI AMC from 18.25% to 10% each, within a deadline. T.
ber 12. The minimum investment Rowe Price owns 26% in UTI AMC, but the four government institutions together
amount is Rs.5,000 and the fund will command a majority on its board.
be benchmarked against the S&P
BSE 200. T. Rowe Price approached the Bombay high court on 8 August, seeking its in-
tervention to force the four state-run institutions to reduce their stakes as
"India is among the fastest growing
mandated by the stock markets regulator, and order the continuance of its chief
service sectors, led by rising purchas- executive, Leo Puri. On 28 August, it withdrew the petition.
ing power, fast growth in social mo-
bility and increasing urbanization "The government has said this time that it will work out a plan favourable for
trends," says Sunil Subramaniam, all stakeholders and the AMC. The government will direct the four public sector
Managing Director, Sundaram Mu- sponsor-cum shareholders (who have their own separate in-house AMC busi-
tual Fund. nesses) to reduce their stakes in UTI AMC in the next three months, definitely
by end of March 2019," said the first person.
Services have been a structural
theme in Asia's third-biggest UTI AMC is likely to come out with a Rs.5,000-crore IPO.
economy, with the India Services In- "The total offer to the public in the IPO could be around 40% at an estimated
dex delivering 5x returns in the last size of Rs. 5,000 crore, if we go by the calculation done by ICICI Securities Ltd.
decade. Globally, consumer service which was appointed by UTI AMC as a banker for its proposed IPO," said the
as a theme has performed well.
second person.
The indices have outperformed
benchmarks over time. For instance, It was in July 2007 that UTI AMC got its first board approval for an IPO. In Janu-
ary 2008, the AMC, the second largest then, filed a draft prospectus with Sebi,
the US Consumer Service Index has proposing to offer 48 million shares to raise Rs. 1,800-2,400 crore. Just two
delivered a CAGR of 15.4% vs 11.5% months later, it deferred the plans as stocks tanked, hurting its valuations.
for S&P 500. The MSCI Japan Con-
sumer Service Index has delivered a In September 2008, US-based investment bank Lehman Brothers Holdings Inc.
CAGR of 17.8% vs 11.5% for Nikkei. collapsed, sending world markets into a tailspin, forcing UTI AMC to shelve its
IPO plans. In November 2009, T. Rowe Price Global Investment Services Ltd
The fund will have 193 stocks as its
investible universe, with the fund bought a 26% stake in UTI AMC for $140 million (around Rs. 652 crore), valuing
UTI AMC at about 3.25% of its average assets under management at the time.
manager expecting new companies
to be added to the list through sub-
sequent IPOs. In the large-cap space,
there are 31 companies with an ag-
gregate market cap of more than
Rs.30 lakh crore.

20 | 2018 | SEPTEMBER | BANKING FINANCE