UTI MD Leo Puri's extension case: T Rowe Price takes petition back

Leo Puri, Managing Director, UTI Mutual Fund
US-based T Rowe Price on Tuesday withdrew its case filed in the Bombay High Court, seeking extension in tenure of former UTI Asset Management Company’s (AMC) managing director Leo Puri, and compliance with crossholding norms. 

People in the know said the move came after the Finance Ministry and Securities and Exchange Board of India (Sebi) discussed various possibilities for out-of-court settlement with the involved parties. 

The markets regulator is said to have clarified that the foreign asset manager need not trim its 26 per cent stake to 10 per cent with respect to the cross-holding norms. The said rule is only applicable to domestic fund houses. 

Besides, T Rowe’s concerns over the AMC's affairs, such as board composition and its long-pending initial public offering (IPO), have been settled. The people said that the ministry and regulator have given assurance to the firm that the IPO is on track and will be launched in due course of time. 

With this, the AMC board will speed up the appointment process for its new MD. Leo Puri’s tenure came to an end on August 13.  
The issue came into spotlight as differences between AMC shareholders, over Puri's extension, got escalated. The four principal shareholders — LIC, Bank of Baroda, State Bank of India, and Punjab National Bank — were not in the favour of extension. 
The people added that representatives of the public sector stakeholders were of the view that UTI AMC’s performance was on a downward spiral since Puri had taken charge. Further, the fund house had lost market share as growth in its asset base had been below the industry average.

T Rowe sought directions from Sebi and the Centre to ensure shareholders comply with cross-holding norms. 

Sebi regulations stipulate that no sponsor of an MF can own over 10 per cent in more than one fund house. Rules also bar a single entity from having representation on the board of an AMC or trustee company of more than one MF. 

However, all state-owned shareholders in UTI MF, also own separate AMCs. These entities have been given time by Sebi till March 13, 2019, to comply with the norms. LIC, SBI, PNB and Bank of Baroda hold 18.25 per cent each. 

According to reports, SBI and LIC made a representation to Sebi, arguing that cross-holding norms should also apply to T Rowe given it had its own asset management business in the US. 

Without naming anyone in particular, T Rowe Price spokesperson Edward Giltenan had said "They have created conditions that prevent timely compliance with Sebi's regulation, requiring each of them to sell below 10 per cent…certain conflicted board members have begun acting as a block, disrupting board governance, and seeking to create a gap in leadership, apparently to delay progress toward selling down their stakes." he added.  

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