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UTI to shed non-core stakes

Calcutta, Sept. 10: Unit Trust of India (UTI) wants to sell off its stake in UTI Bank Ltd along with other non-core investments, which include significant holdings in the National Stock Exchange (NSE), Stock Holding Corporation of India Ltd (SHCIL) and National Securities Depository Ltd (NSDL), among others.

UTI chairman M. Damodaran said: “UTI Bank needs substantial investments for growth. It has raised capital in the past by issuing debt and equity, and continues to scout for strategic investors. UTI does not need to remain invested in the bank. We will consider selling our stake if we get a good deal.”

UTI Bank was promoted by UTI along with few other financial institutions. It was incorporated in 1994, and was the first private sector bank that was set up in the country after the government opened up the banking sector in 1993.

Initially, UTI held over 60 per cent of the bank’s shares, but its stake now stands diluted at 41.71 per cent. UTI holds eight crore shares and, at the current market price of Rs 35, its stake is valued at Rs 285 crore.

“Besides the bank, UTI also promoted a number of institutions like the NSE, NSDL and SHCIL, among others. These are facilities used by UTI, which it had promoted in the past,” Damodaran said. “UTI had a different mandate when these were set up. We will sell off our holdings in these institutions as well, if we get value,” he added. But selling these investments will be difficult.

The divestment proceeds of these holdings will go to UTI-I, the asset management company that will be carved out of Unit Trust of India through a special Ordinance to be promulgated by the government to hold the assured return schemes — the monthly income plans (MIPs) and Unit Scheme 64 (US-64).

The Development Reserve Fund, with its negative corpus of around Rs 50 crore, too, would be transferred to UTI-I. The fund holds UTI’s real estate assets, which are being evaluated afresh. “It is mandatory for UTI to re-assess its real estate every two years. In 2000, the real estate was valued at Rs 850 crore,” Damodaran said.

Besides selling off its non-core investments, UTI will merge some of its subsidiaries with itself. Among the companies that Damodaran said would be merged with UTI-I were UTI Securities Exchange Ltd and UTI Investor Services Ltd. The decision was taken at UTI’s last board meeting, he said.

UTI Securities is an independent stock-broking firm, while UTI Investor Services provides back-office support to UTI’s schemes and acts as the registrar and transfer agent. “Going forward, UTI could service investors of other mutual funds and companies that do not want to have their own investor services arm. We are trying to work out such an arrangement with some banks and mutual funds,” Damodaran said.

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