Tuesday, August 02, 2005

UTI is the most preferred MF brand

In one of the most dramatic turnarounds in the financial sector. UTI Mutual Fund (UTI MF) of Unit Trust of India (UTI), has emerged the most preferred mutual fund brand in a survey by a television channel. This achievement has come after being almost written off in 2001. The Assets Under Manage-ment (AUM) of UTI Mutual Fund are the highest (Rs 22,000 crore) and it is all set to put the past behind and grow. But this will only be possible if the government gets out of UTI MF as soon as possible, allows it to function and makes it conform to all the rules that apply to other mutual funds. The time is perfect for a government exit. The bailout and brand restoration is complete, it has got back its Rs 8,000-crore bailout funding (which is rare) and it has an opportunity to cash-in further, by selling off the Asset Management Company (AMC). The survival of the UTI MF brand depends on who acquires the AMC. Media reports say the Fund has been valued at Rs 2,000 crore, which is a hefty 8% of its AUM of Rs 22,000 crore, as against the industry average of 5%. The government can hope to get this value only from a foreign fund, or by persuading the existing sponsors (State Bank of India MF, Bank of Baroda, Life Insurance Corporation and Punjab National Bank). However, UTI's sponsors have strong individual brand names and would have little incentive to nurture the Unit Trust of India brand in the long run. This would be true of any large foreign fund, in the unlikely event that it is allowed to bid for UTI MF.