UTI needs to lower IPO expectations: Bankers

UTI Asset Management, India's fourth-largest mutual fund firm, will
have to lower its IPO expectation by as much as a quarter or delay the
offer, preliminary meetings with investors have showed, bankers said.

The company had intended to raise as much as $500 million by selling
49 percent of the firm. But with financial sector stocks sliding
almost 40 percent this year, hurt by globla markt turmoil, UTI will
have to settle for less.

"If they want to hit the market by July 22, then the offer has to be
very, very attractively priced," a banker with one of the lead
managers said, who declined to be identified while the sale was still
under way.

The offer has to open before July 22, 90 days from when the capital
market regulator approved UTI's offer prospectus, or under Indian
rules it will have to file a revised prospectus.

Citigroup, Enam Securities and JM Financial are the lead managers to
the issue.

"We have already informed the sponsors a haircut is needed. Investors
are baulking at the price we are asking," another banker said, also
declining to be identified.

The bankers expect the investment committees of sponsors to make a
call next week on the listing.

"The dates are not yet frozen ... we will be in a position to answer
this again in the next week," UTI's Chief Marketing Officer Jaideep
Bhattacharya told Reuters.

Top lender State Bank of India, Bank of Baroda, Punjan National Bank
and Life Insurance Corp of India -- all state-run -- each own 25
percent of UTI.

Indian shares have fallen by a quarter so far this year amid global
financial market turmoil, soaring inflation and fears the Economy will
slow along with a global downturn.

Annual inflation raced to 8.75 percent at the end of May, its highest
in more than seven years, while growth is seen slowing this year from
the 8.8 percent average of the last five years.

These factors have crimped demand for loans and hurt the margins of
banks.

It is difficult to gauge a fair value for UTI as there are no listed
mutual funds in the country, bankers said.

However, in March, Standard Chartered sold its Indian asset management
business to Infrastructure Development Finance Co for $205 million,
valuing the firm at about 6 percent of its assets under management.

At a $1 billion valuation, UTI would be valued at 8 percent of its end-
May average assets, far lower than 13 percent Eton...Park paid in
December for a 5 percent stake in top mutual fund firm Reliance
Capital Asset Management.

Indian fund management firms are expensive by global standards though.
Asset management firms Blackrock and Legg Mason are quoting at less
than 2 percent of their assets under management..