US-based investment management firm T Rowe Price is reportedly assured to increase its stake in UTI Trustee Company to 51 percent from 26 percent, indicating that the American asset manager wants to gain controlling authority at India’s eighth-largest mutual fund.
Close to a decade, our government and PSUs it controls, are trying pull control of the UTI Asset Management Company (AMC), finally, in June the solution for this arrived. With UTI finally getting the SEBI permission for a Rs 3,000-3,500-crore IPO, the stage was set for the four PSUs – State Bank of India, Punjab national bank, Bank of Baroda, and life insurance Corporation to reduce their equity within the AMC down to 10 percent each. Though SEBI rules ban anyone from holding more than 10% shares in more than one AMC all the four PSUs working their AMCs the law didn’t seem to use these PSUs.
T Rowe price could able to use its global network to get in foreign funds for UTI to manage in India—there was still a big potential problem. After the IPO, while the PSUs would still control around 40% of UTI’s shares, TRP’s shareholding is to come down to 23% from the current 26%. Under Indian law, the shareholding falling below 26% means TRP would no longer have the power to stop certain resolutions, like the appointment of directors, etc.
There was another relief valve, which was the trustee company. Under the SEBI regulations, each AMC Should have the trustee to ensure its functions that are going with the letter and the laws, and including best interest to the investors; in other words, aside from the AMC’s board, another layer of oversight has been added. The arguments between TRP and the PSUs in these years, the Trustee Board has, more often than not, played the role of the neutral linesman and has stopped certain actions that would are detrimental to the AMC’s functioning; the Trustee Board repeated the need for the PSU shareholder to reduce their stake to below 10% keep with the SEBI rules. Currently the PSUs and TRP having shares in the Trustee Company which are proportionate to their current shareholding. The ending is a tragic saga of boardroom arguments which was once India’s premier mutual fund company.
