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    Tata Asset Management considers buying 45% in UTI AMC

    Synopsis

    As of June 30, assets under management (AUM) of UTI AMC and Tata AMC were ₹2.24 lakh crore and ₹88,367 crore, respectively. UTI AMC, listed in October 2020, commands a market capitalisation of ₹9,520 crore as of Friday. At the current market price, the Tatas will have to shell out around ₹4,300 crore to buy a 45% stake in the UTI AMC. Tata Sons and Tata Investment Corporation own 68% and 32% stakes, respectively, in Tata AMC.

    AMCAgencies
    In a smaller deal, Sundaram AMC acquired the assets of Principal Asset Management for about Rs 340 crore last year.
    Mumbai: Tata Group, the promoter of Tata Asset Management Company (AMC), is exploring options to buy about 45% in UTI AMC from four state-owned financial entities, three people with knowledge of the matter told ET.

    Punjab National Bank (PNB), Life Insurance Corporation (LIC), State Bank of India (SBI) and Bank of Baroda (BOB) together own the stake in UTI AMC. If the deal goes through and Tata AMC and UTI AMC are eventually merged, the combined entity would be the fourth largest asset manager in India - after SBI AMC, ICICI Prudential AMC, and HDFC AMC.

    As of June 30, assets under management (AUM) of UTI AMC and Tata AMC were ₹2.24 lakh crore and ₹88,367 crore, respectively. UTI AMC, listed in October 2020, commands a market capitalisation of ₹9,520 crore as of Friday. At the current market price, the Tatas will have to shell out around ₹4,300 crore to buy a 45% stake in the UTI AMC. Tata Sons and Tata Investment Corporation own 68% and 32% stakes, respectively, in Tata AMC.
    AMC

    A Bid to Scale up Quickly
    To be sure, it is not clear yet whether the Tata Group will merge the two AMCs. UTI AMC also has another significant shareholder. UTI AMC, which was carved out of the erstwhile Unit Trust of India (UTI) in 2003, has no promoters but sponsors such as LIC, PNB, SBI, and BOB. The other big investor in the AMC is T Rowe Price Group Inc which, through its wholly owned subsidiary T Rowe Price International, held a 22.97% stake as on June 30, 2022.

    Mailed queries to Tata AMC, LIC, SBI, PNB, and BOB remained unanswered till press time.

    Top officials close to the Tatas said the current asset management business of the group is small and like all other businesses, the view taken is that if it has to be a significant player in the segment, it has to scale up. "And that means the M&A route is the only way to quickly scale up," said one of the people cited above.

    For the year ended March 31, 2022, UTI AMC posted a net profit of Rs 534 crore on revenue of Rs 1,319 crore. Tata AMC has reported revenue of Rs 342 crore and a net profit of Rs 103 crore in FY22.

    Earlier this year, PNB said it wants to monetise its non-core assets, and that includes selling its stake in UTI AMC. In October 2020, the lender sold its 3% stake in UTI AMC for around Rs 180 crore, bringing down ownership to 15.22%.

    In December 2019, market regulator the Securities and Exchange Board of India (Sebi) directed LIC, SBI and BOB to reduce their stakes in UTI AMC by December 2020. These three public sector financial institutions held 18.24% each back then, while Sebi's cross-holding norms for mutual funds do not allow the sponsor of one AMC to hold more than 10% in another. Subsequently, these three firms reduced their stakes below 10% during the IPO in October 2020.

    The latest M&A deal in the Rs 38-lakh crore mutual fund industry was by a consortium comprising Bandhan Financial Holdings Limited, GIC, and ChrysCapital, which acquired IDFC Mutual Fund for Rs 4,500 crore. In December last year, HSBC AMC acquired L&T Investment Management (LTIM) for about Rs 3,200 crore. Similarly, Baroda Asset Management was recently merged with BNP Paribas Asset Management India.

    In a smaller deal, Sundaram AMC acquired the assets of Principal Asset Management for about Rs 340 crore last year.

    Currently, SBI Mutual Fund is the largest AMC in India in terms of AUM of Rs 6.47 lakh crore, followed by ICICI Prudential and HDFC Mutual Fund with Rs 4.65 lakh crore and Rs 4.15 Lakh crore, respectively.




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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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