Sucheta Dalal :UTI: A brand name in search of an owner
Sucheta Dalal

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UTI: A brand name in search of an owner  

October 28, 2006

UTI: A brand name in search of an owner

SUCHETA DALAL

Posted online: Saturday, October 28, 2006 at 0024 hours IST

 

MUMBAI, OCT 27:  UTI Bank has stirred a hornet’s nest with a recent letter to UTI Mutual Fund (UTIMF) regarding its plans to register the UTI Bank brand name after 13 years of existence. UTI Bank chairman PJ Nayak says the bank was allowed to use the UTI name but had never formally registered it. But, after several phishing attacks (jargon for the cloning of a bank/finance company website to lure its customers to part with key information such as credit card numbers, passwords or PINs) recently, the bank discovered that without a registered brand name and copyright, it cannot hope to initiate formal action against cyber thieves.

While this sounds innocuous enough, the registration of the brand name has several implications. Over the last 13 years, UTI Bank has grown rapidly, built up considerable brand equity and is now set for expansion. Some of its plans are giving the jitters to its promoter, Life Insurance Corporation (LIC), which holds 10.42% in the bank, and UTIMF, which was a part of the erstwhile Unit Trust of India.

UTI Bank has recently filed an application with the Securities and Exchange Board of India (Sebi) to set up an asset management company—UBL AMC. Again, Nayak says that it only has plans to set up a private equity infrastructure fund that will be similar to the private equity fund of IDFC AMC. He insists that the bank has no immediate plans to launch a mutual fund to compete with UTIMF.

UTI Bank has not received any response from UTIMF to its letter. The mutual fund’s consent is not really required for going ahead with registration. UTIMF chairman UK Sinha’s view could not be ascertained since he says he is on leave in Bihar. According to market circles, however, there are several reasons for UTIMF to be nervous.

For one, UTI Bank was allowed to be promoted by Unit Trust of India despite several objections to a mutual fund institution promoting a bank. Five years later, the parent itself was in deep trouble and in late 2000, it was split into UTI Mutual Fund and the Specified Undertaking of the UTI (SU-UTI), the latter acting as a holding company for all of UTI’s non-mutual fund activities. During the split, UTI Bank was allowed unfettered rights to use the UTI brand name until 2008. Former finance minister Jaswant Singh had then said a substantial stake in UTIMF would be sold to a strategic investor. However, the change in government led to fresh thinking and four public sector entities—SBI, LIC, Bank of Baroda and PNB—took 25% each in UTIMF.

The question is, what happens post-2008? UTI Bank today is as big a brand as UTI Mutual Fund, or, as Nayak says, the bank is the true custodian of the brand name. Yet, UTI Bank has floated two subsidiaries with the UBL name—UBL Sales and UBL AMC. Nayak says it avoids brand confusion with UTIMF, yet it deprives the bank from being able to capitalise on its brand name.

Interestingly, 27.54% of UTI Bank’s shares are held by SU-UTI, which is supposed to be wound up soon, while UTIMF, which may be affected by the bank’s plans to set up an AMC, has no stake or bargaining clout. UTIMF’s long- term future is also unclear. Two of its significant shareholders, SBI and LIC, are keen on acquiring UTIMF by buying out other shareholders and merging it with their own fund operations, but the government has shown no inclination to decide the issue. If UTIMF is indeed acquired by one of its promoters, or any other strategic investor, the brand name will be automatically extinguished, leaving UTI Bank as the sole owner of the brand—at least until 2008.

Meanwhile, the government has under two years to decide the future of UTIMF as well as the UTI brand.

See original story at: http://www.financialexpress.com/fe_full_story.php?content_id=144793


-- Sucheta Dalal



 



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