INDIA BUSINESS WORLD - DECEMBER 1^st - DECEMBER 15^th - 2007

RBI FREEZES UBS' BUYOUT OF STANCHART MUTUAL FUND

The acquisition of Standard Chartered's mutual fund business by Swiss banking giant UBS has hit a roadblock. The Reserve Bank of India (RBI) is understood to have rejected the $120-million deal, which was announced in January this year.

Sources said the central bank has blocked the deal citing existing restrictions on transfer of shares in a nonbanking finance company. Here, the asset management company (AMC) that manages the mutual fund schemes is the NBFC. A secondary transaction entails the transfer of the NBFC licence, which only the banking regulator can clear.

The central bank is learnt to have conveyed its decision about a month back, following which UBS has put in a fresh application. While it's unclear what the apex bank's reservations are, the Swiss group, incidentally, has had issues with financial market regulators in the past.

And StanChart is yet to book the sale proceeds in its accounts. In a recent regulatory filing, the bank said, "We announced on January 26, 2007, that we had agreed, subject to regulatory approvals, the sale of our Indian asset management company to UBS for around $120 million. It now seems unlikely that UBS will receive the requisite approvals in 2007. The sales proceeds will not therefore be included in the headline income or profit for the year."

When contacted, a Stan-Chart spokesperson said, "The closure of the deal is subject to UBS securing all regulatory approvals." A Hong Kong-based spokesperson for UBS said, "UBS considers its discussions with the regulators to be confidential. We would not presume to preempt the regulatory approval process by commenting further."

However, UBS has received the goahead both from FIPB as well as capital market regulator Sebi. FIPB had, in May, cleared a proposal by UBS to bring in Rs 224.10 crore for acquisition of NBFC companies as operating subsidiaries by acquiring existing shares.