US-based investment management firm T Rowe Price is reportedly poised to hike its stake in UTI Trustee Company to 51 per cent from 26 per cent, indicating that the American asset manager wants to gain controlling authority at India’s eighth-largest mutual fund.
T Rowe Price, which has a 26 per cent stake in UTI Mutual Fund, will acquire a portion of the shareholding of Life Insurance Corporation (LIC), State Bank of India (SBI) and Bank of Baroda (BoB) in the trustee company, two people with direct knowledge of the development told ET. “This is not something that we’re able to comment on,” a spokesperson for T Rowe Price told the financial daily.
The move assumes significance as a higher holding in the trustee company provides the US-based shareholder of UTI Mutual Fund the right to appoint directors on the board of the trustee firm and also indirectly control operations of the mutual fund. Plus, the domestic shareholders will exit the board of UTI Trustee, the publication mentioned, citing reliable sources aware of the matter.
Tejesh Chitlangi, senior partner, IC Universal Legal told the daily: “De facto, trustees do exercise a great degree of control over the AMC by virtue of provisions under Sebi Mutual Funds Regulations. Generally, the shareholding pattern of a trustee company mirrors that of the AMC.”
SBI, LIC, PNB and BoB are the four domestic shareholders that hold 18.5% each in UTI Trustee. Also, these companies own 18.24% each in UTI Asset Management Company. The plan to offload over 8 per cent stake each in the trustee company to the American asset manager follows pressure from the Securities and Exchange Board of India (Sebi) to reduce their holdings in both companies.
T Rowe Price had the ‘Right of First Refusal’ whenever the local shareholders intended to sell. In 2018, the market regulator had introduced cross-holding limits in mutual funds to eradicate potential conflicts of interest, instructing that if a shareholder has minimum 10 per cent interest in a mutual fund, it cannot hold a similar-sized stake in another fund house and would also have to abandon its board positions.
LIC, SBI, and BoB own separate mutual funds. Last week, Sebi penalised these three state-run financial companies Rs 10 lakh each for failing to cut their stakes in UTI Asset Management. The three firms have to reduce their stakes in UTI to 10 per cent, each, from the existing 18.24 per cent, each. PNB will hold its stake in UTI Trustee as it does not own a mutual fund.
In the AMC, these three shareholders will offload a part of their stakes in a proposed IPO for which the regulator has given its green signal. The transaction valuation of the UTI Trustee stake sale could not be determined. In a recent submission to the market regulator, the three public sector financial institutions had stated the sale of their stake in UTI Trustee Company is in the process of finalisation, the publication mentioned.
Sandip Ginodia , CEO
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