Three of UTI Asset Management Co.'s sponsors said Monday they have agreed to sell part of their stakes in India's oldest fund house and its trustee company to U.S.-based investment manager T. Rowe Price Global Investment Services Ltd.

Government-run State Bank of India (500112.BY), Punjab National Bank (532461.BY) and Bank of Baroda (532134.BY)--which own 25% each of UTI AMC and UTI Trustee Co.--will sell a 6.5% stake each, they said in separate regulatory filings.

State-run Life Insurance Corp. of India, which owns the remaining 25%, couldn't be immediately contacted for comment. R.K. Bakshi, an executive director at Bank of Baroda, said earlier the four sponsors had agreed to sell a combined 26% stake to T. Rowe Price.

A UTI executive didn't respond to calls, while T. Rowe Price didn't reply to emailed queries.

State Bank of India and Bank of Baroda didn't provide any financial terms of the deal, while Punjab National Bank said it will tender 8.125 million shares of UTI AMC at INR200 each, or for a total of about INR1.63 billion (about $35 million). It will also sell 6,500 shares of UTI Trustee Co. at INR11.92 per share for an aggregate of about INR77,500.

This assigns a value of about INR25.07 billion to the fund house, the nation's fourth largest, or about 3.3% of its average assets under management of INR768.47 billion at the end of October.

The decision to involve T. Rowe Price as a partner comes after weak market conditions forced the fund house to abort plans for an initial public offering in July last year.

The U.S. company as a strategic investor is likely to bolster UTI's position in the crowded domestic asset management business and help it pitch products better in overseas markets and provide assistance in fund management.

"From a business angle, it makes sense to bring in somebody with a global expertise and a strong financial muscle," Bank of Baroda's Bakshi said.

Industry experts said the valuation is attractive for Baltimore, Maryland-based T. Rowe Price, which, as per its Web site, had $366 billion in total assets as of Sept. 30.

"UTI has one of the largest sales networks, agent base and retail assets in the industry," said Aditya Agarwal, managing director and country manager at Morningstar India Pvt. Ltd.

"A 5%-6% valuation (on the assets under management) would have been ideal for UTI, but this is a decent deal, given that retail participation in India's mutual fund industry is tending to slow down a bit after the abolition of the entry load on mutual funds," Agarwal added.

Mutual fund analysts have been saying the capital market regulator's decision to scrap the entry load--the portion of investor's money that fund houses took to pay commissions--will temporarily hurt the industry as distributors will lose the incentive to sell funds.

The Indian mutual fund industry had total assets under management of about INR7.63 trillion at the end of October.

The deal is reasonably attractive, said Dhirendra Kumar, chief executive of New Delhi-based research firm Value Research. "Six out of every 10 mutual fund investors in India are UTI investors," he added.

-By Shikhar Balwani and Gurdev Singh Virk, Dow Jones Newswires; 91 22 6145 6119; Gurdev.Singh@dowjones.com
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