Though incorporated in November 2002, UTI Asset Management Company (UTI AMC)—which has its roots dating back to 1964—can definitely be called India’s oldest mutual fund house. As of June-end this year, UTI AMC—which will hit the primary market with its maiden initial public offering (IPO) next week—stood out as the country’s second largest asset management company (AMC) in terms of total assets under management (AUM), and the eighth largest AMC in terms of quarterly average assets under management.
The long-awaited IPO, which will be open to subscription between September 29 and October 1, is priced in the range of ₹552 and ₹554, against its face value of ₹10 a share. At the upper end of the price range, the size of the IPO would be ₹2,160 crore.
Investors will get a chance to buy 38.98 million shares which are being sold by existing shareholders. State Bank of India (SBI), Life Insurance Corporation of India (LIC), and Bank of Baroda (BOB) would be paring their existing stakes by 8.25% each, while Punjab National Bank and T. Rowe Price International will dilute 3% of their existing stake.
However, what is surprising is that retail investors aren’t being offered a discount. Salil Pitale, joint managing director of Axis Capital—one of the book-running lead managers to the issue—explained that after detailed discussions with the shareholders and prospective investors, the focus was to provide an offer that was attractive to all prospective shareholders. “The pricing will help all investor types to create reasonable returns,” he said.
The mutual fund industry has witnessed a shake-up because of regulatory changes and some have questioned the timing of the IPO. However, UTI AMC’s chief executive officer Imtaiyazur Rahman said that he did not foresee any major regulatory change over the next 18-24 months, which would impact the pricing of the IPO. “And, regulatory changes on stricter disclosures will anyways be good for the investors at large,” he said.
UTI AMC has been a multi-bagger for all the five shareholders who are paring their stake through the IPO. In case of SBI, LIC, BOB and PNB—who invested in UTRI AMC way back in December 2002 as sponsors have built-up their stakes of 18.24%, each at an average acquisition cost of ₹99.76 a share.
T. Rowe Price International, which holds 26% in UTI AMC prior to the IPO, will continue to be the largest shareholder with 23% stake after the IPO. It has built its stake at an average cost of ₹200.43 a share.
At the upper end of the price band, at ₹554 a share, SBI, LIC, BOB, and PNB are seen to be making a gain of ₹454.24 a share—which works out to 455.3% or 4.55x growth. T. Rowe Price would be gaining ₹353.57 a share—which works out to176.41% or 1.76 times growth.
That the early investors in the mutual fund will soon take home multi-bagger gains after being patiently invested for nearly two decades, the sayings that ‘mutual funds are about long term’ and ‘money is made by staying invested for longer periods’ seem to be turning true.
What the incoming investors make through the IPO will be another story to witness in the future.