T. Rowe Price Enters India - Analyst Blog

On Jan 20, T. Rowe Price Group Inc. (TROW) announced the purchase of the 26% share of the Unit Trust of India Asset Management Company Ltd. (UTI AMC) and UTI Trustee Company Pvt. Ltd., for INR 6.5 billion or US$142.4 million. The deal was being mulled over by the management since Nov, 2009. The transaction was sealed post the Securities Exchange Board of India (SEBI) approval in India. 

As a part of the deal, State Bank of India, Life Insurance Corporation of India, Punjab National Bank and Bank of Baroda has divested 6.5% each in T. Rowe Price. Subsequent to the sale, these four sponsors will retain 18.5% each in India’s fourth-largest mutual fund company. T. Rowe Price appointed ICICI Securities Ltd., a division of ICICI Bank Ltd. (IBN), for representing itself in India. 

While the transaction was a part of the restructuring program in UTI, T. Rowe is expected to explore its investment opportunities in the vast and rapidly developing Indian market. Following the deal, T. Rowe Price will route all its investments into India through UTI. Additionally, the company will invest in UTI Venture and the private equity funds floated by UTI. Further, the Indian fund house will get assistance in fund management and research as well as in the sale of its products abroad. 

T. Rowe Price operates with a diverse business model and keeps introducing new funds and other investment portfolios to complement and expand the investment offerings from time to time. Further, the company remains debt free with substantial liquidity that includes cash and mutual fund investment holdings. Despite the recent market downturn and the ongoing volatility, T. Rowe Price continues to outpace its peers in AUM growth through its disciplined and risk-aware investment approach. The company’s lower fund cost structure, distribution methods and fund shareholder and administrative services is expected to maintain stability in mutual fund AUM throughout the market cycles.
 
However, the company operates in a highly competitive funds market in the US and abroad, including India. The company’s AUM business is also exposed to the ongoing market volatility and competitive risk, which could add pressure while operating in a completely new environment. Currently, we remain on the edge to analyze the developments in the business operations of both the firms in India. 

UTI Asset Management Company, with approximately US $17.8 billion in average assets under management as on Dec 2009, is the fourth largest asset manager in India and the investment manager of UTI Mutual Fund, a SEBI registered mutual fund.
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