UTI Asset Management defers IPO plans

UTI Asset Management Co., India's oldest money manager, canceled plans to sell shares after the nation's benchmark index posted its worst first half on record, four people familiar with the matter said. 

UTI, based in Mumbai, had proposed to sell 48.5 million shares, according to an offer document filed with the Securities & Exchange Board of India on Jan. 9. The money manager is required to complete the IPO by July 21 or restart the process, under Indian rules. Khurshid Mistry, a spokeswoman for UTI Asset, declined to comment today. 

The money manager becomes the fifth Indian company to pull a share sale this year, and joins more than 160 companies, including developer Emaar MGF Land Ltd., to have delayed or canceled IPOs globally in 2008 as faltering economic growth led investors to abandon equities. The withdrawal is a blow to UTI's owners, who can't raise funds from selling stakes bought in 2005. 

``It is bad news for State Bank of India and Life Insurance Corp.,'' two of the four shareholders, said Dhirendra Kumar, managing director of Value Research Ltd., a firm that tracks Indian mutual funds. Still, ``I don't think it is a permanent shelving, it may be just a temporary postponement.'' 

State Bank of India, Life Insurance, Punjab National Bank Ltd. and Bank of Baroda, the four government-controlled entities that each hold 25 percent of the UTI Asset, were planning to sell 12.1 million shares, or 38.8 percent of their combined holding, said the offer document. 

Benchmark Index Drops 

The Unit Trust of India was formed in 1963. In 2003, the ailing fund management business was split into two, and stakes in UTI Asset was sold to the four state-run companies in 2005. 

The IPO may be revived later, said the people, who asked not to be named before an official announcement. 

UTI Asset planned the share sale after the Bombay Stock Exchange's Sensitive Index climbed 47 percent last year, making it Asia's best performer after China and Bangladesh. The index is down 32 percent this year as interest rates climbed to a six-and- a-half year high after surging fuel and foods costs drove inflation to a 13-year high. 

JM Financial Consultants Pvt., Citigroup Inc. and Enam Securities Pvt. were hired to arrange the IPO. Goldman Sachs Group Inc., UBS AG, ICICI Securities Ltd., SBI Capital Markets Ltd. and CLSA Ltd. also won mandates to manage the sale. 

UTI Asset Management also canceled plans to sell 16 million shares to select investors before the IPO, the people said.

Pioneer Investments acquires 51% shareholding in BOB AMC

The Securities and Exchange Board of India (SEBI) has issued a no objection to the inclusion of Pioneer Global Asset Management SpA (Pioneer Investments) as a co-sponsor in BOB Mutual Fund. Consequently, Pioneer Investments has acquired a 51% shareholding in BOB Asset Management Company Limited. Pioneer Investments through this joint venture with Bank of Baroda is set to commence its asset management operations and mutual fund business in India. The new venture will now be named as “Baroda Pioneer Asset Management Company Limited”, with Pioneer Investments holding 51% stake with management control and Bank of Baroda holding 49% in the AMC. 

The joint venture combines world class investment management skills of Pioneer Investments, gained over the last 80 years from various markets across the globe, with the very strong presence in India of Bank of Baroda’s wide network of branches. For Investors, this would result in newer opportunities for wealth creation combined with easy accessibility. 

Henceforth, BOB MF will be known as “Baroda Pioneer Mutual Fund”. The Schemes of the Mutual Fund would continue to be governed by their respective existing Offer Documents. The Board of Directors of the AMC will be reconstituted with nominees from the two partners Pioneer Investments and Bank of Baroda as well as the complement of prominent persons as independent directors.  

The Chief Executive Officer of this newly formed joint venture AMC will be Mr. Rajan Krishnan who has been associated with the project from earlier this year in April. Rajan has over 13 years of experience in the mutual fund industry focusing on establishing national sales & distribution networks.

Speaking on this occasion, Mr. Dario Frigerio, CEO, Pioneer Investments said, “The Mutual Fund industry in India is one of the most exciting opportunities we see around the world. Notwithstanding the recent volatility, we are convinced there is a huge potential for the asset management industry in India and the present market conditions present a good opportunity to build a great long term track record. In addition, as well the established commitment to investing in mutual funds in the main metros, there is clear evidence there is a new generation of investors coming into the Indian fund market in the second tier cities. With this joint venture, we are well positioned to bring our experience in global asset management to the advantage of investors in India in partnership with the experience, presence and customer knowledge of Bank of Baroda."

Commenting on this occasion, Mr. M D Mallya, Chairman & Managing Director, Bank of Baroda said,” This joint venture with Pioneer Investments would help us offer a wider bouquet of financial services to the existing as well as new customers of Bank of Baroda. This would be a big step forward in our endeavours to make our very wide branch network resemble a financial supermarket to the benefit of our customers." 
Sourced From: Hanmer / MS&L Communications Pvt Ltd