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IDBI Principal keen on UTI-II

Freny Patel in Mumbai

IDBI Principal Mutual Fund is interested in picking up UTI-II, the entity to be split from the Unit Trust of India.

Sanjay Sachdev, managing director and chief executive officer, IDBI Principal Asset Management Company, said: "We are interested in picking up the assets of UTI-II."

The proposal is yet to go for the board's approval, following which a due diligence will take place.

"We need to look into the credit quality of the portfolio," said Sachdev. A string of mutual funds have expressed interest to pick up UTI-II, which, according to the recently announced bailout package by the government for UTI, will be privatised.

The corpus of the new entity is at around Rs 17,000 crore (Rs 170 billion), and the market gauges that the price for these assets will be at a high premium, perhaps the highest paid in the domestic market so far.

According to informed sources, the government is not keen to sell UTI-II to wholly owned foreign mutual funds, and hence having the Industrial Development Bank of India as a partner. This will give IDBI Principal a head start over others as IDBI is a government entity.

With its existing corpus of approximately Rs 1,600 crore (Rs 16 billion), IDBI Principal is keen to buy a share in UTI-II as this "will give us access to long-term retail funds, and will help us expand our customer base and assets", said Sachdev.

IDBI Principal AMC has targeted to increase its assets to Rs 2,500 crore (Rs 25 billion) by fiscal 2003. With a net inflow of Rs 100 crore (Rs 1 billion) every month, the company also expects to meet targets.

IDBI Principal AMC is a 50:50 joint venture between IDBI and the US-based Principal Financial Group. The market had been talking of a possible spilt between the two partners. Company sources said that Principal continues to be keen to pick up an additional 25 per cent holding in the AMC, and has no intention of breaking from IDBI.

Principal intends to hike its stake in IDBI Principal AMC by at least one per cent, in order to consolidate its accounts, to meet the norms under the US generally accepted accounting principals.

However, as Principal's interest in India is increasing with the opening up of the pension industry to private players, the US company is keen to increase its holding in the AMC.

It, thus, wishes to enhance its stake and hold 75 per cent in the mutual fund.

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