UTI Asset Management Company announced the launch of an initial public offering (IPO) that will open on September 29. According to inside sources, the Company plans to raise Rs 3,000 crores from the issue. The Initial Public Offering will consist of the sale of 3,89,87,081 equity shares of Rs. 10 Face value from State Bank of India, Life Insurance Corporation of India (LIC), Punjab National Bank, Bank of Baroda, and T Rowe Price International.
The breakup of the shares between the companies
The State Bank of India, Life Insurance Corporation of India, and Bank of Baroda will divest 1,04,59,949 equity shares each in the company. On the other hand, Punjab National Bank and T Rowe Price International will sell 38,03,617 equity shares each during the sale of shares. The offering for subscription will begin on 29th September 2020 and will close on 1st October 2020.
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The Equity Shares of the offering are proposed to be listed on the Bombay Stock Exchange and National Stock Exchange. The price band for the IPO is yet to be decided by the asset management company. Axis Capital, Citigroup Global Markets India, DSP Merrill Lynch, ICICI Securities, JM Financial, Kotak Mahindra Capital Company, and SBI Capital Markets are the book running lead managers to the issue.
SEBI’s warning to SBI, LIC, and Bank of Baroda
The share sale is very critical for the shareholders in light of the regulatory’s need to reduce their stake in the asset manager. According to SEBI, the three primary stakeholders of the company—State Bank of India, Life Insurance Corporation of India, and Bank of Baroda, have to reduce their stake to 10% by December.
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In the month of August, markets regulator Securities and Exchange Board of India (SEBI) penalized three state-owned financial companies, including SBI, LIC, and Bank of Baroda, charging them on their non-compliance with mutual funds norms. The Board fined them with an amount of Rs. 10 lakhs each on failure to reduce their stakes in UTI AMC.
UTI AMC to follow a two-phase disposal process
LIC, SBI, and Bank of Baroda are to divest their stakes in two phases. The first phase being a 25% divestment of the stake by all institutional shareholders on a pro-rata basis by way of an initial public offering (IPO) and the second phase being 10.92% divestment through a follow-on public offer.
In this first phase the three lenders, SBI, LIC, and Bank of Baroda would offload an 8.25% stake each, while T Rowe Price and Punjab National Bank will both divest 3% each. T Rowe Price is a majority shareholder with a 26% stake in UTI AMC, whereas PNB holds an 18.24% stake.
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Momentum back in the IPO Market
This announcement from the mutual fund manager comes at a time when the IPO market is experiencing a revival in action. This is the tenth initial public offering (IPO) launch of 2020. The previous launches we saw this year were from SBI Card, Rossari Biotech, Mindspace Business Parks REIT, Happiest Minds Technologies, Route Mobile, Compute Age Management Services, Chemcon Speciality Chemicals, Angel Broking IPO, and Likhitha Infrastructure. According to insider sources, more companies are planning to hit the IPO market by the month-end.