Four state-owned financial entities- Punjab National Bank (NSEI:PNB), Life Insurance Corporation of India (NSEI:LICI), State Bank of India (NSEI:SBIN), and Bank of Baroda Limited (NSEI:BANKBARODA) - that together own just over 45% of UTI Asset Management Company Limited (NSEI:UTIAMC) are understood to be working on inviting formal bids for selling their stakes, top officials close to the development told ET. Industry sources said these entities have recently appointed merchant bankers to initiate the sale process. Earlier, Tata Sons Private Limited (Tata Group) was understood to be in advanced talks to buy a majority stake in UTI AMC from the four public sector entities, but the discussions fell through after a large investor in the AMC insisted that the other investors follow a formal bidding process to sell their stakes instead of using the nomination route, said one of the officials cited above.

There were also some issues that had to be sorted around the stakes held, it is learnt. The Tata Group will now put in a fresh bid for the AMC, officials close to the development said. In September last year, the Department of Investment and Public Asset Management (Dipam) issued detailed guidelines for public sector companies on dealing with their downstream investments.

While giving state entities greater autonomy, the government has asked the respective boards to follow thorough due diligence on qualified bidders, including assessment of security risks and political clearance of qualified bidders if the latter is necessary from a national security standpoint. Not Classified as Promoters ET's mailed queries to UTI AMC, Punjab National Bank, Life Insurance Corporation of India, State Bank of India, Bank of Baroda and the Tata Group remained unanswered. Although UTI AMC had earlier denied talks of a stake sale by the four public-sector sponsors, the Tata Group is keen on buying the 45% stake from the four state-owned financial entities as its current asset management business is very small.