Wednesday May 21, 01:22 PM
Fund firm UTI looks to relaunch $500 mln IPO |
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By Tony Munroe and Nishant Kumar
HONG KONG/MUMBAI (Reuters) - UTI Asset Management, India's third-largest mutual fund firm, plans to revive its initial public offering after shelving a $500 million domestic listing earlier this year when markets plunged.
UTI management will meet with investors next week in Mumbai, Singapore and Hong Kong ahead of a hoped-for deal in the next two or three months, Chief Marketing Officer Jaideep Bhattacharya told Reuters on Wednesday.
"There is a little bit of UTI in nearly every household. From that perspective, there will be a reasonable amount of attractiveness for our IPO," Bhattacharya said.
"In the next 10 days, we will be in a good position as to what the next steps are," he added.
Bhattacharya did not confirm the potential fund-raising amount, but two sources familiar with the situation, who could not be identified because of the sensitivity of the matter, said UTI is still looking to raise roughly $500 million.
India's fund management industry has grown by 70 percent over the past 12 months, and the Boston Consulting Group forecasts that the industry's assets as a whole will nearly quadruple to $520 billion by 2015.
Aditya Agarwal, joint managing director at fund tracker ICRA, expects the deal to generate plenty of demand given the sector's growth and UTI's nationwide network of more than 200 branches.
"Even if the markets are down to some extent ... I still feel that there will be a lot of appetite," said Abgarwal, who expects UTI to command a valuation of about 8 or 9 percent of assets.
State Bank of India, Bank of Baroda, Punjab National Bank and Life Insurance Corp of India -- all government-run -- each hold 25 percent of UTI.
The owners intend to sell a total of 49 percent of the company through the IPO and a private placement ahead of the deal, a banker involved in the process said.
"The initial plan to sell some shares in a pre-IPO placement still holds good. We are targeting diluting 5-10 percent ahead of the IPO," the banker said.
UTI's average monthly assets grew by 44.5 percent to 525.5 billion rupees ($12.3 billion) in the 12 months through April, data from the Association of Mutual Funds in India show.
If the deal succeeds, it could help revive an Indian IPO market that had gone cold.
IPO volumes from India have nearly doubled so far this year from the same period last year, according to Thomson Reuters data, although Reliance Power's nearly $3 billion January listing accounts for most of the $3.8 billion raised from 18 offerings.
UTI had hoped to complete a domestic listing in April but delayed the deal as India's stock market went into freefall, with the benchmark Sensex dropping 23 percent in the first three months of the year. Since the start of April, the index has risen 10 percent.
GROWTH SECTOR
Investors ploughed 4.8 percent of household savings into funds during 2006/07, up from 0.4 percent two years ago, central bank data show.
That rapidly rising asset base, high profitability, low penetration among retail investors and the expected entry of more than 20 new fund firms are boosting valuations of the 33-member industry, experts say.
Indian fund firms on average generate operating profit, as a percentage of assets, of 32 basis points, compared to 12 bps in the UK and 18 bps in the United States, according to McKinsey.
In March, Standard Chartered sold its Indian asset management arm to Infrastructure Development Finance Co for $205 million, valuing the firm at about 6 percent of its assets, higher than the 4 percent that Swiss bank UBS had agreed to pay last year before the deal was later called off.
In December, industry leader Reliance Capital said Eton Park would buy about 5 percent of its asset management arm for 5 billion rupees, valuing India's largest fund firm at 13 percent of total assets.
Reliance Capital and rival ICICI Prudential, which early this year overtook UTI as India's second-largest fund house, are also considering IPOs, media reports have said.
Citigroup, Enam Securities and JM Financial are sponsoring UTI's listing.
(Additional reporting by Narayanan Somasundaram in Mumbai)
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