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Govt to seek out global asset managers for UTI-II

Kausik Datta & Pradeep Gooptu in Kolkata

The Centre will launch a global hunt for professional managers to manage UTI-II, proposed to be formed with the Unit Trust of India's net asset value-based schemes.

UTI Chairman M Damodaran said a global advertisement would be issued inviting proposals from professional management groups, or an asset management company, to manage UTI-II.

"The nitty-gritty for managing UTI-II is not yet clear. The government may entrust people with management power to supervise functioning of the proposed UTI-II. It may also handover the management to an asset management company," he added.

Though the country's largest mutual fund is yet to receive a blueprint of the financial and structural re-engineering package, it is clear UTI-II will be brought under a professional management team and hived off in due course with the UTI brand name.

Damodaran refused to hazard a guess on UTI-II valuation, which has a Rs 18,000 crore (Rs 180 billion) asset base at current prices. Bidders would come out with a figure, based on a multiple of their expected return from the asset of the fund, he said. "It could be in the region of Rs 900 crore (Rs 9 billion)," he added.

His estimation was based on the industry average of 5 per cent valuation capital of the asset base. It would certainly not be Rs 18,000 crore, he added.

Many private mutual funds have made their intentions to pitch for the controlling stake of UTI-II. Industry watchers said global majors would also express their interest in picking up UTI-II.

Of the 72 existing schemes, 50 schemes will be transferred to UTI-II, which will have a total equity portfolio of over Rs 10,000 crore (Rs 100 billion). Ulip-71 is likely to emerge the biggest scheme in UTI-II with an asset base of over Rs 3,700 crore (Rs 37 billion).

UTI to unlock value in ITC holding

The Unit Trust of India would sell its holding in ITC, but would be looking for a 'control premium' rather than selling at market rates, UTI Chairman M Damodaran said. ITC was a unique case where 'control premium' would come into play as it had its shareholding split into three equal blocks, held by BAT plc, financial institutions and the public.

UTI is yet to hold talks with any buyer for transfer of its holding in the Rs 10,000 crore tobacco, paper and hotels major.

But it would be looking at options to unlock value in its holding, he said. UTI held 11.79 per cent of the ITC's Rs 247.5 crore (Rs 2.475 billion) equity on March 2002.

At the same time, if the management of any company were to match the price on offer, UTI would prefer to sell to the existing management. There has not been any concrete offer from any buyer of ITC.

UTI's position on ITC was clear - it was a seller in ITC but at the right price. Restrictions on foreign investment in tobacco would be a major stumbling block for the right buyer.

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