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Govt not to sell UTI-MF to pvt players

July 19, 2005 15:26 IST

The government is not in favour of selling UTI Mutual Fund to a private player and has insisted that one of the existing sponsors buy it by this fiscal.

The finance ministry has appointed SBI Caps as the merchant banker to carry out the valuation of the country's largest fund house that manages assets worth Rs 22,000 crore (Rs 220 billion),

"No private player will be roped in. We have talked only with the existing sponsors," a senior government official said on Tuesday.

UTI AMC may be sold to the highest bidder among the four existing sponsors -- State Bank of India, Life Insurance Corporation, Punjab National Bank and Bank of Baroda.

Top officials of SBI, LIC, PNB and BoB have given a presentation to the Finance Ministry last week on the future course of action for the country's largest fund house including buying out the stakes of other players.

LIC and SBI appears to be the front runners for the UTI Mutual Fund. "The proceeds from the sell-off would go the Exchequer," the official said but declined to hazard a guess on the amount that UTI AMC could fetch.

According to industry experts, a mutual fund could be acquired at two-six per cent of its assets under management.

Going by this, UTI AMC could fetch Rs 500-1,200 crore (Rs 5-12 billion). The valuation could be higher considering UTI AMC's brand image and huge network across the country.

UTI AMC has been one of the fastest growing funds in the country and targets Rs 26,000 crore (Rs 260 billion) in AUM by the end of this fiscal, a growth of over 25 per cent.

The fund is now geared up to expand its branch network to 15 more cities this fiscal over and above the 56 cities they are already into. UTI AMC plans to expand its branch network to 100 cities in the next two years.

After the fiasco in 2001, the government had bifurcated the erstwhile Unit Trust of India into two units -- the net asset value-based schemes came under the fold of UTI AMC and the assured return scheme went to a Specified Undertaking of UTI

The four leading financial institutions and banks were asked to become the sponsors of UTI AMC, for which they formed a company with an initial capital of Rs 10 crore (Rs 100 million).

The four players have 25 per cent stake each in the sponsor company.

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