BREAKINGVIEWS-Softly way on Indian governance may pay for T Rowe
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)
By Jeff Glekin
MUMBAI Jan 17 (Reuters Breakingviews) - T. Rowe Price of the United States owns 26 pct of UTI, the Indian fund manager. But it can't seem to agree with co-shareholders about who should run the business. Delhi may well want its say too. Resolution is required. The best way forward might be to embrace firm-but-quiet compromise.
Price, a venerable name in U.S. asset management, acquired its stake in its Indian counterpart two years ago. It invested $140 million, taking 6.5 percent stakes from four heavy-hitting, state-run, financial institutions that used to control all of UTI.
As one of Asia's oldest and biggest firms with a huge distribution network in India, UTI seemed a good fit for T. Rowe. But trouble started brewing when UTI's chairman and managing director, U.K. Sinha was tapped by the finance ministry to head India's securities market regulator. Sinha was backed by the finance minister's top advisor, Omita Paul.
As might be expected, UTI's board appointed a committee to identify a successor. Global headhunters Egon Zehnder shortlisted candidates, and the committee also met with Jitesh Khosla, a senior government official. It did not recommend his candidature to the board: but according to some reports Khosla, brother of Omita Paul, is preferred by UTI's four Indian shareholders.
Some, meanwhile, suspect that since the plum UTI job is usually reserved for a senior bureaucrat, the finance ministry wants it to stay that way. Price, it is assumed, would like to see a candidate appointed on merit alone.
Little has been said in public about the affair. But disagreements about succession would explain the interim appointment, after nearly a year, of Imtaiyazur Rahman. Indecision is also hurting the business. UTI's assets under management have slipped 7 percent since February 2011 as India's fund management industry rose 2 percent.
Resolution is required. And if the direct and indirect owners - which include the India state -- cannot agree on one candidate, they might consider splitting the post to make a CEO and chairman. It could neatly enhance UTI's corporate governance standards at the same time as giving all parties the voice they probably deserve.
The softly-softly approach requires patience, but could bring the best long term results for the international incomer and the Indian incumbents.
-- UTI Asset Management Company, the oldest mutual fund manager in India, appointed an interim chief executive officer on Jan. 13. It is promoting chief financial officer Imtaiyazur Rahman.
-- Rahman will lead until a final decision is taken on appointment of a chairman and managing director. UTI's last chairman and managing director, U.K. Sinha, left to become chairman of the Securities and Exchange Board of India, the financial regulator, in February 2011.
-- According to India media reports, the government would like to see Jitesh Khosla at the helm of UTI. Khosla, is an Indian civil servant currently serving as the Additional Secretary, Government of Assam. He has held several senior positions in the Finance and Commerce Ministries. He is the brother of Omita Paul, a senior advisor of Finance Minister Pranab Mukherjee.
-- Life Insurance Corporation of India owns an 18.5 percent stake in UTI, as does State Bank of India, Punjab National Bank and Bank of Baroda.
-- Breakingviews approached T. Rowe Price who declined to comment on why it had taken over a year to appoint event an interim CEO.
-- Reuters: T. Rowe Price CEO stands by Indian joint venture
(Editing by Robert Cole and David Evans)
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