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UTI Public Float

UTI AMC is set to become the 1st Indian AMC to float a public issue. The AMC will do that in April this year. While AMCs going public is common abroad, it still is a new concept in India

The trend of asset management companies (AMC) going public is catching up in India. UTI AMC, the country's second largest mutual fund, is planning to float a $ 500 million public issue. With this float UTI will be the first AMC in India to go public. It plans to hold road shows in March before its listing which is scheduled for April.

UTI Mutual Fund is among India's largest and the oldest AMC. At the end of December, the assets managed by the fund house stood at Rs 56,854 crore.

State Bank of India, Bank of Baroda, Punjab National Bank and Life Insurance Corporation of India hold 25 per cent each in the AMC. After the IPO, in which 19.4 million shares will be offered to public for subscription, the above players' stake in the fund management company will fall to 51 per cent. The UTI chairman had told Value Research last year that the public issue was not to raise fresh capital but to enable the current shareholders unlock value. He had also said then that the second reason for the public issue was be to bring in more involvement of the staff by way of employee stock options.

Unfortunately, the fund house has too many schemes and most of them have been poor performers. A notable exception has been UTI Infrastructure, which has been a top performing fund. In fact, it was the higher return generator in 2006 delivering 61.5 per cent. But, it should also be remembered that among the five best-performing diversified equity funds in 2006, three were infrastructure funds.

After UTI Mutual Fund, HDFC Mutual Fund will be the second AMC to get listed on the bourses. This AMC has plans to list later this calendar year.

The listing of AMCs may be novel in the Indian market but is quite common abroad. In the United States, asset managers like Franklin Resourses, Janus Capital Group, T Rowe Price and Invesco are all listed on the bourses.