Tata Asset Management Company is understood to be acquiring close to 45 per cent of UTI Mutual Fund from four of its stakeholders.
The Tatas may have to shell out up to Rs 4,900 crore at the current market price. Reports of the potential acquisition sent the shares of UTI Asset Management Company surging on the bourses.
The UTI AMC scrip ended 15 per cent higher on the BSE at Rs 861.80 after rising almost 19.43 per cent to touch an intra-day high of Rs 895. The fund house presently has a market capitalisation of Rs 10,941 crore.
UTI AMC had average assets under management of Rs 2,24,279 crore (as of June 30, 2022) and Tata Mutual Fund, Rs 88,367 crore. The latter currently holds around 2.62 per cent in UTI MF.
T Rowe Price is the largest shareholder in UTI MF with a stake of 22.97 per cent. According to reports, the Tatas may acquire the stake from Punjab National Bank, State Bank of India, Life Insurance Corporation and Bank of Baroda.
While PNB holds 15.22 per cent, the other three PSU entities have a shareholding of 9.98 per cent each. If the Tatas acquire UTI AMC, the combined entity will be the sixth largest AMC in the country.
The stake sale follows a rule that says a sponsor of a mutual fund cannot have a stake of more than 10 per cent in another fund house. The Securities and Exchange Board of India (Sebi) in 2019 asked LIC, SBI and BoB to bring down their stakes in UTI MF.
The three players brought down their holdings from over 18 per cent each to under 10 per cent in the IPO of UTI AMC in September last year. Earlier this year, PNB said it wanted to bring down its stake. The buzz is that the other entities are also looking to reduce their stake.
The mutual fund industry has witnessed several M&A deals in the past. In April, a consortium of Bandhan Financial Holdings, GIC and ChrysCapital acquired IDFC Mutual Fund for Rs 4,500 crore.
Last year, HSBC MF bought L&T Investment Management for almost Rs 3,200 crore, while Sundaram AMC acquired the asset management businesses of Principal AMC.
The other deals included Sachin Bansal-owned Navi MF which purchased Essel MF. According to AMFI data, there are 43 fund houses in the country and their average asset under management stands at over Rs 37.74 lakh crore. SBI Mutual Fund is the largest MF having an average AUM of Rs 6,47,474 crore.