UTI Mutual IPO In Rs 850-1,050 Band

UTI Mutual Fund's proposed initial public offer (IPO) is likely to be priced between Rs 850 and Rs 1,050, sources said.

The IPO is likely to come out in the second week of January.

The 11 investment banking firms, which are in the race to manage the first public offer by an India mutual fund, have valued the asset management company (AMC) between Rs 5,500 crore and Rs 9,000 crore.

At Rs 5,500 crore, the per share value would be Rs 850 and at Rs 9,000 crore, it would have a per share value of Rs 1,200.

The IPO would offer a 5 per cent discount to retail investors, sources said.

The valuation at Rs 1,200 per share reflects what in industry circles is called scarcity value, which derives from the fund house's status as the first mutual fund to be hitting the bourses.

But the thinking within the AMC is not to go for the highest valuation as far as retail investors are concerned, and hence, the upper band is likely to be fixed at Rs 1,050.

According to sources, of the 11 investment bankers in the fray to manage the offer, the dart may ultimately fall on one of the four - Lehman Brothers, Enam Securities, Citibank and JM Financial.

The AMC has already decided to go for a 20 per cent pre-IPO placement through the reverse auction route.

Under this route, the buyers will offer their price with conditions like the amount of unsubscribed portions they are willing to underwrite or board positions.

Though such proposals are made after the filing of the draft prospectus, players can sound out the AMC even before that, sources said.

Accordingly, UBS, which is likely to be a co-runner, may get a good chunk of the strategic stake up for sale as its underwriting conditions are the best, sources said. UBS is believed to have made an informal offer.

State Bank of India, Punjab National Bank, Life Insurance Corp and Bank of Baroda are the four sponsor companies of the AMC.

UTI MF has assets under management (AUM) worth Rs 45,000 crore.

In terms of AUM, it ranks third after Reliance MF and ICICI Prudential MF. The final details of the UTI MF offer would be announced on October 29.

UTI MF or UTI -II was set up in 2003 after the US -64 fiasco. While UTI MF has been given the responsibility to run all net asset value based schemes of UTI, the Specified Undertaking of the Unit Trust of India (SUUTI) or UTI -I has been housing all the assured return schemes and UTI's flagship scheme, US-64.

Of late, UTI MF has been going aggressive in overseas markets and it

It recently entered into an offshore fund distribution agreement with National Bank of Australia.

The AMC already has such alliances in Singapore, Japan, Mauritius and London.