Tata Group in final round of talks to acquire majority stake in UTI AMC

Tata Group in final round of talks to acquire majority stake in UTI AMC

There Is Internal Approval For The Deal And The Tata Group Has Also Received In-principle Approval From An To Create New Large Asset Manager; In Final Negotiations To Acquire Majority Stake In UTI AMC

December 20, 2022: The Tata Group has also received in-principle approval from another major investor in UTI AMC – global investment management firm T Rowe Price Group – which holds a 23 per cent stake.

The conglomerate is looking to acquire majority stake in mutual funds from PNB, SBI, LIC and BOB.
The more than 150-year-old Tata Group may soon buy a majority stake in UTI Asset Management Co (AMC), India’s eighth largest mutual fund.

The group is in final talks for stake, which it will buy from four government-run financial institutions – Punjab National Bank, Life Insurance Corporation of India, State Bank of India and Bank of Baroda.
PNB, SBI, LIC and BOB together own 45.16 percent of the country’s eight largest mutual funds.

The combined entity, if the deal goes through and merges Tata AMC and UTI AMC, will become India’s fourth largest asset management company.

The Tata deal is in the final stages and an agreement on valuation is being sought, people with knowledge of the development told The Economic Times.

SBI AMC, ICICI Prudential AMC and HDFC AMC are the top three managers in India, according to Amphi data.

There is internal approval for the deal and the Tata Group has also received in-principle approval from another major investor in AMC – global investment management firm T Rowe Price Group – which holds a 23 per cent stake in it, officials said. Know it.

On the other hand, the ownership of Tata AMC is such that Tata Sons and Tata Investment Corporation own 68 percent and 32 percent respectively.

UTI AMC, listed in October 2020, stock rose more than 12 percent on Monday after reports of Tata’s interest. As of Friday’s close, its market capitalization stood at Rs. 9,791 crores.

Tata Group will pay around Rs. 4,400 crore and 26 per cent for mandatory open offer of Rs. 2,500 crore will have to be spent.

As on September 30, UTI AMC’s assets under management (AUM) stood at Rs. 2.34 lakh crore or about 6 percent of the total AUM. Tata AMC, the 12th largest in terms of AUM, on September 30 was Rs. 91,284 crore in assets under management.

It may be mentioned here that public lender PNB had earlier this year expressed its desire to monetize its non-core assets including selling its stake in UTI AMC.

In October 2020, the bank bought a 3 per cent stake in UTI AMC for around Rs. 180 crore, which reduced its share to 15.22 percent.

Three years ago in December 2019, market regulator SEBI had also directed LIC, SBI and BOB to bring down their stake in UTI AMC by December 2020.

These three public sector financial institutions held 18.24 per cent stake at the time, while SEBI’s cross-holding norms for mutual funds do not allow a sponsor of one AMC to hold more than 10 per cent stake in another.

Subsequently, LIC, SBI and BOB reduced their stake in UTI AMC to less than 10 percent during the IPO in October 2020.

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