Tata in final talks to buy majority stake in UTI AMC from PSU fin cos

Mumbai: The Tata Group is in final negotiations to buy a majority stake in India's eighth-biggest mutual fund, UTI Asset Management Co (AMC), from four state-owned financial entities, according to people close to the development. Punjab National Bank (PNB), Life Insurance Corporation of India (LIC), State Bank of India (SBI) and Bank of Baroda (BOB) together own a 45.16% stake in UTI AMC. A final agreement is being sought on the deal valuation, the people said.

Officials close to the development said internal approvals are in and Tata has received in-principle nod from the other big investor in the AMC - global investment management firm T Rowe Price Group, which holds around 23%. ET had first reported Tata's interest in acquiring UTI AMC in August this year. If the deal goes through and Tata AMC and UTI AMC are merged, the combined entity would be the fourth largest asset manager in India.

Deal Value for Transaction

SBI AMC, ICICI Prudential AMC and HDFC AMC are the top three in the list.

Two Tata Group entities - Tata Sons and Tata Investment Corporation - own 68% and 32%, respectively, in Tata AMC.

UTI AMC, listed in October 2020, commanded a market capitalisation of Rs 9,791 crore on Friday. At the current market price, the Tata Group will have to pay about Rs 4,400 crore to buy a 45% stake in the UTI AMC and another Rs 2,500 crore for the 26% mandatory open offer.

UTI AMC's assets under management (AUM) on September 30 amounted to Rs 2.34 lakh crore or about 6% of the total AUM. Tata AMC, the 12th biggest in terms of AUM, managed assets of Rs 91,284 crore on September 30.

UTI AMC has no promoters but sponsors such as LIC, PNB, SBI and BOB. T Rowe Price Group held a 22.97% stake on September 30 through T Rowe Price International.

Tata AMC, LIC, SBI, PNB and BOB didn't respond to queries.

UTI AMC posted a net profit of ₹534 crore on revenue of ₹1,319 crore in FY22. Tata AMC reported revenue of ₹342 crore and a net profit of Rs 103 crore in FY22.

Earlier this year, PNB said it wants to monetise its non-core assets and that includes selling its stake in UTI AMC. In October 2020, the lender sold its 3% stake in UTI AMC for around ₹180 crore, bringing down ownership to 15.22%.

In December 2019, the Securities and Exchange Board of India (Sebi) directed LIC, SBI and BOB to reduce their stakes in UTI AMC by December 2020. These three public sector financial institutions held 18.24% each back then, while Sebi's cross-holding norms for mutual funds do not allow the sponsor of one AMC to hold more than 10% in another. Subsequently, the three reduced their stakes to below 10% during the IPO in October 2020.

The latest M&A deal in the ₹38 lakh crore mutual fund industry was by a consortium comprising Bandhan Financial Holdings Ltd, GIC and ChrysCapital, which acquired IDFC Mutual Fund for ₹4,500 crore. In December last year, HSBC AMC acquired L&T Investment Management for about ₹3,200 crore. Baroda Asset Management was recently merged with BNP Paribas Asset Management India.

In a smaller deal, Sundaram AMC acquired the assets of Principal Asset Management for about Rs 340 crore last year.