India's oldest mutual fund, UTI Asset Management Company (UTI AMC) is in advanced stages of discussions to divest 26 per cent to a strategic partner. The potential buyers are the US firm T Rowe Price, Shinsei Bank of Japan and two European firms. The buyer is expected to pay between Rs 1,500 crore to Rs 1,800 crore, which would value the AMC at between Rs 6,000 crore and Rs 7,500 crore.

According to the plans, approved by the finance ministry, the four sponsors of UTI AMC - State Bank of India, Life Insurance Corporation of India, Bank of Baroda and Punjab National Bank, will offload part of their holdings to the strategic partner. The four state-owned entities currently hold 25% each in the asset management company.

Despite the global financial market turmoil, the prospect of a stake in UTI AMC has evoked interest from leading international players due to its firm foothold in the Indian mutual fund industry. Though it has slipped from its numero uno position, UTI AMC is still the most profitable fund house. It posted a Rs 147-crore net profit in the previous fiscal. UTI AMC managed Rs 38,358 crore as on November 30, 2008 and is the country's third largest fund house.

UTI AMC was formed in 2003, when the government was forced to restructure the erstwhile Unit Trust of India, following a payments crisis. All assured return schemes were transferred to Special Undertaking of UTI (SUUTI) and the rest to UTI AMC. The government subsequently divested its ownership in UTI AMC in favour of these four institutions for Rs 1,250 crore.