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Malegam prefers single AMC

P Vaidyanathan Iyer in New Delhi

Noted chartered accountant Y H Malegam, who had submitted a report on corporate restructuring of the Unit Trust of India to the finance ministry last August, feels a single asset management company would have helped UTI to reduce its costs.

Talking to Business Standard, Malegam said, "Economies of scale can be achieved when there is a single AMC. We had suggested one AMC for UTI where the costs would have been low."

He was here to participate in a conference organised by the Federation of Indian Chambers of Commerce and Industry and the Institute of Chartered Accountants of India.

The government has decided to split UTI which manages assets of Rs 42,000 crore (Rs 420 billion) at the current market prices into two entities.

It has, however, not yet formalised the structure of UTI-I and UTI-II. UTI-I comprises the flagship US-64 and all assured-return schemes and UTI-II consists of all net asset value-linked schemes.

Malegam also touched on the sensitive human resources aspect in the two new entities being formed. "Salaries of employees who would be part of UTI-I would be as per the government scale while those of UTI-II could be market-linked," he said.

According to Malegam, these are crucial aspects the government can look into. He said the Centre had accepted his committee's recommendations.

"The main point we made was that the government should make up its mind whether it should run UTI or not. It cannot do both, run it and still remain out of it," he said.

The Malegam committee had recommended a three-tier structure in line with the Securities and Exchange Board of India's regulations comprising a sponsor, a trustee company and an AMC.

As regards the sponsor, it said 60 per cent stake should be sold to a strategic partner and had suggested a cap of a 40 per cent stake on institution holdings. The trustee company was to be a fully owned subsidiary of the sponsor company.

The share of the sponsor company in the AMC was to be restricted to 40 per cent with the balance to be offered to the public.

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