SBI to divest 8.25% in UTI AMC share sale; BoB, LIC and PNB may follow suit

The total dilution in the IPO could be 33 per cent

State Bank of India (SBI) on Wednesday said it will divest 8.25 per cent in the proposed initial public offering (IPO) of UTI Asset Management Company (AMC). The lender currently holds 18.25 per cent stake in the mutual fund (MF) house. Three other public sector undertakings (PSU) Life Insurance Corporation (LIC) of India, Bank of Baroda (BoB), and Punjab National Bank (PNB) also hold 18.25 per cent each, while US-based T Rowe Price owns 26 per cent.

Sources say LIC, BoB, and PNB too are expected to divest 8.25 per cent each in the UTI AMC IPO.

The total dilution in the IPO could be 33 per cent. If the issue has fresh component, it could lead to further dilution.

SBI’s proposed 8.25 per cent disinvestment is the exact quantum required to comply with market regulator Securities and Exchange Board of India’s (Sebi’s) cross-shareholding norms. Sebi rules don’t permit an entity to hold more than 10 per cent in single fund house. Currently, SBI, LIC, and BoB operate their separate fund houses along with their stake in UTI AMC.

“Pursuant to the applicable provision on the Sebi regulation, we advise that the executive committee of the central board of directors (ECCB) of the bank at its meeting held today (December 4) has accorded final approval, for divestment of SBI stake in UTI AMC up to 8.25 per cent through IPO by way…,” SBI said in an exchange notification.

The country’s seventh-biggest MF house is expected to file its offer document with market regulator Sebi before the end of December.

UTI AMC could seek valuations between Rs 10,000 crore and Rs 13,000 crore in the IPO.

The issue will be underpinned by a rally in shares of asset managers this year.

Shares of HDFC MF and Nippon India MF (formerly Reliance MF) have rallied 122 per cent and 120 per cent, respectively, so far this year.

At the end of the July-September quarter, UTI MF had assets under management of Rs 1.54 trillion, while HDFC MF and Nippon MF manage Rs 3.8 trillion and Rs 2 trillion respectively, the data provided by industry body Association of Mutual Funds in India showed.