Government fears Sebi's 10 per cent cross-holding cap may hit PSUs

NEW DELHI: Sebi’s decision to cap cross-holding in fund houses at 10% has not gone down well with a section of the government, which believes that the move will put pressure on the four public sector shareholders — SBI, LIC, Punjab National Bank and Bank of Baroda — to pare their stakes.

Fifteen years ago, the four state-run players were hand-picked by the government as the new promoters of UTI Asset Management Company and now hold an 18.24% stake each with T Rowe Price being the largest shareholder with 26%. The remaining 1% stake is with employees of what is the new avatar of India’s oldest fund house.

The four public sector financial services firms have their own fund houses and will have to dilute their stake in one of the entities. But they see their holding in UTI Asset Management Company more as a warehousing exercise.


When T Rowe Price was roped in close to a decade ago, the understanding was that the public sector players would dilute their holdings through an initial public offer, which has not materialised due to differences between the shareholders.

While a public offer remains the easiest bet, it will not be possible to dilute the entire over 8% each in one go. Sources told TOI that the government is looking at various options after what many described as a “surprise decision” by Sebi that may not enable the four public sector players to get the best value for their shares.

An option could be to get some other government-run entities to buy shares into UTI AMC, while ensuring that the current PSU shareholders meet the regulatory requirement of 10% shareholding.

While LIC and SBI are going strong, PNB has announced its plans to exit its joint venture with Principal. In contrast, just last week, BoB said it will buy out its partner UniCredit’s entire 51% stake in Baroda Pioneer AMC.

In recent years, UTI AMC has slipped in the mutual fund rankings and was placed sixth according to the latest AMFI data.