The UTI Asset Management Company (AMC) has appointed Imtaiyazur Rahman as its chief executive officer (CEO), who was acting as the interim CEO after Leo Puri’s term came to an end in 2018.

The move will help the fund house to expedite the process of launching its long-pending initial public offer (IPO) and also address concerns of Securities and Exchange Board of India (Sebi) on position of CEO lying vacant for quite some time.

The fund house had filed for draft red herring prospectus (DRHP) with Sebi in December 2019 after the PSU bank shareholders agreed to divest their holdings.

Investment bankers say typically Sebi approves IPO documents in 45-60 days, but the process could get delayed if the regulator raises queries.

Industry sources suggest absence of a permanent CEO for such a large-sized fund house would have been one of the concerns for Sebi. The fund house had average assets under management of Rs 1.5 trillion for March quarter.

"This move will give comfort to the unitholders with a CEO now identified. In the MF industry, we have plenty of examples to suggest that importance of top management continuity is important for growth of the business," said Amit Bivalkar, director at Sapient Wealth.

The UTI MF’s asset base for domestic business has compounded annually at 3.54 per cent between 2017 and 2020 (comparing quarterly average assets for March quarter). In the same period, the MF industry's domestic asset base has compounded annually at 13.88 per cent.

After UK Sinha left the chairman and managing director's position in 2011, the fund house had no head for two years till Leo Puri was appointed to lead the fund house. Differences between the PSU bank shareholders and sole foreign shareholder T Rowe Price had led to hurdles in Puri's appointment. Even Rahman’s appointment as CEO has come nearly two years after he was appointed as interim head.

The UTI MF’s IPO has also been a long-drawn process due to differences between the PSU bank shareholders and T Rowe Price.

UTI MF’s IPO is an offer for sale of 38 million shares by the State Bank of India, Bank of Baroda, Life Insurance Corporation of India, Punjab National Bank, and T Rowe Price. Barring T Rowe Price and PNB, the others are selling their stake to comply with Sebi's cross-holding norms, which require them to have less than 10 per cent stake in the fund house.

According to the DRHP filed by UTI AMC, Sebi was recently probing some investments made by India Debt Opportunities Fund (IDOF) -- a fund managed by UTI International. The show-cause notices issued by Sebi allege that IDOF is not a domestic MF scheme under the Sebi MF regulations and investments made by IDOF in IDOF scheme were in contravention of FPI regulations. Investments in governments securities were allegedly made without purchasing debt limits under auction route, in breach of norms, allegedly causing notional loss of Rs 244.34 crore to government of India.