UTI MF zeroes in on two allies

National Australia Bank and Japan’s Shinsei Bank are likely to be the only two strategic partners in UTI Mutual Fund’s pre-IPO (initial public offering) equity stake sale.

Sources said both these banks are seriously considering entering the country’s oldest mutual fund house as strategic partners by picking 5% each. Shinsei Bank already has a tie-up with UTI Mutual Fund.

In addition to these two, investment bankers have also shortlisted close to 30 top Foreign Institutional Investors (FIIs), who will be approached for financial investments before the asset management company’s initial share offering early next year.

UTI Mutual Fund is in the final stages of getting into an agreement with National Australia Bank for its offshore fund distribution. Early this year, the Mumbai-headquartered MF, through a joint venture with Shinsei Bank, collected about Rs 2,000 crore from Japanese investors for investments in Indian stocks.

While these two will be strategic investors, the others will be inducted as pure financial investors. Both Shinsei Bank and National Australia Bank are capable of bringing value to the table as far as UTI Mutual Fund is concerned, they said.

UTI Mutual Fund, which is now equally owned by Life Insurance Corporation (LIC) and three public sector banks, is valued between Rs 6,000 and Rs 8,000 crore. Bankers said the issue will constitute about 30% of that amount – about Rs 1,800-2,400 crore.

All the four sponsors will be diluting 12.5% each through the pre-IPO private placement and the IPO. At present, UTI Mutual Fund has an equity base of 50 million shares and will be issuing 10 million as fresh issue. Post-listing, UTI MF will become the first mutual fund house in India to be traded on the stock exchanges.

Shareholding by the four state-owned entities — LIC, State Bank of India, Punjab National Bank and Bank of Baroda — which bought the entire government holding in 2005 by acquiring 25% stakes each in UTI AMC, would come down to a combined 51% after the strategic stake sale and IPO. They had bought the government’s stake in the fund house for Rs 1,236 crore.

UTI AMC has close to 8.5 million customers and it is the third biggest fund house (after Reliance and ICICI-Prudential MFs) with assets under management of Rs 52,000-odd crore.

The fund house has appointed Enam Securities, JM Financial and Citigroup as the global coordinators, while Goldman Sachs, UBS, SBI Securities and ICICI Securities will be the lead book-running managers.