Ed Bernard on T Rowe Price's investment in India's UTI
In January, Baltimore-based asset manager T Rowe Price acquired a 26% stake in India's largest fund manager, Unit Trust of India, for Rs6.5 billion ($142.4 million). The acquisition was achieved via a sell-down of 6.5% by each of UTI's four original shareholders, State Bank of India, Punjab National Bank, Bank of Baroda and the Life Insurance Corporation of India.
We talk to Edward Bernard about the deal. Bernard is vice-chairman of the board of directors of T Rowe Price Group, a member of the firm's management committee and chairman of the T Rowe Price mutual funds.
What is the strategic rationale underlying the partnership between T Rowe Price and UTI?
We believe that purchasing an influential stake in an existing, leading Indian fund manager provides us with the best opportunity to capitalise on the Indian market's potential growth. UTI has a solid style of investment management, a very strong brand and reputation and an extensive customer base, and distribution network.
Moreover, India's large population, demographic trends and high savings rate are attractive for mutual fund investing, while mutual funds in India remain relatively under-penetrated when compared with more mature markets.
But the most compelling force behind the relationship is that our respective management teams, cultures and values fit very well together. Both UTI and T Rowe Price have an unwavering commitment to putting the interests of clients first. We are confident that collaboration between UTI and T Rowe Price will create greater value for Indian investors and each of our companies, than either company would likely achieve on its own.
How was the valuation of Rs250billion agreed upon?
The discussions with UTI, which went on for several months, were more about the long-term strategic alliance. We had broadly agreed on the price with UTI and the shareholders pretty early in the process. As one would expect, subsequent to that, the notional valuation moved up and down with changes in the market.
Why was the investment routed through a sell-down by existing shareholders, rather than new equity issuance?
That was the structure that was proposed when approval to seek a strategic investor was granted by the Indian government.
What are the immediate plans of the partners for creating value?
We anticipate working together with UTI in many ways, and view this as the beginning of a long-term relationship. We believe each of our firms can -- and will -- benefit from the capabilities and expertise of the other. We are mindful that this is a marathon, not a sprint. We look forward to working alongside UTI for many years to come. For now, we're already collaborating on several important investment-related initiatives, including:
1) Our investment leaders and teams are sharing ideas on how to attract, develop, and retain talent, and how to manage investment organisations and processes.
2) Helping UTI expand the global distribution of their Indian investment products. Our respective distribution and product development teams are collaborating on lead generation for various investment products.
3) Providing UTI with access to global investment products that they can sell to Indian investors. In fact, UTI has already filed for a product that would invest in our Global Emerging Markets SICAV fund -- and that should launch soon.
4) Our technology teams are collaborating on system strategies to support investment processes and serve investors.
Do you foresee T Rowe Price increasing its stake further?
It's possible. But it's too early to say.