UTI AMC IPO Financial Analysis (Subscribe)

UTI AMC Strengths

  • Independent asset manager with strong brand and diverse portfolio.
  • Track record of developing retirement solutions that enhance brand value.
  • Multiple distribution channels with wide reach across India. Access to 697 out of 722 districts in India.
  • Disciplined and Rigorous investment process. Portfolio constructed in the light of investment objectives and investment strategies.
  • Strong governance structures and prudent risk management policies.

UTI AMC Challenges

  • Retail participation in mutual funds and other market-linked products are heavily influenced by market performance and sentiment. Prolonged downturn or ongoing volatility could result in decline in industry AUM or shift to relatively lower-risk assets.
  • Sustainability of revenues amidst the peer competition as management fees may have to be lowered to attract more clients which may bring the margins down.

UTI AMC IPO size

    UTI AMC is coming up with IPO of equity shares of 38,987,081amounting to Rs2160 crore. It is purely an offer for sale and the company will not receive anything from the proceeds. Offer of sale includes

    • By SBI: upto 10,459, 949 equity shares
    • By LIC: upto 10,459, 949 equity shares
    • By BOB: upto 10,459, 949 equity shares
    • By PNB: upto 38, 03,617 equity shares
    • By TRP: upto 38, 03,617 equity shares

The offer includes a reservation of 200,000 equity shares for purchase by eligible employees.

UTI AMC price band

  • Rs 552- Rs 554 per share

UTI AMC Open and close date

  • Open Date: 29th September 2020
  • Close Date: 1st October 2020

UTI AMC BRLM of Issue

  1. Kotak Investment banking
  2. Axis Capital
  3. Citigroup Global Markets
  4. BofA Securities
  5. ICICI Securities
  6. JM Financial
  7. SBI Capital Markets Limited

UTI AMC Registrar to the offer

  • KFintech

About the company (UTI AMC)

  • Second largest asset Management Company in India in terms of Total AUM and eighth largest asset managementcompany in India in terms of mutual fund QAAUM as of June 30, 2020, according to CRISIL.
  • Caters to a diverse group of individual and institutional investors througha wide variety of funds and services. UTI manages the domestic mutual funds, provide portfolio managementservices (PMS) to institutional clients and high net worth individuals and manage retirement funds, offshore fundsand alternative investment funds.
  • As of June 30, 2020, total QAAUM for domestic mutual funds (Domestic Mutual

Fund QAAUM was 1,336.3 billion, while Other AUM was 8,493.9 billion.

Schemes offered by UTI AMC

UTI manages 153 domestic mutual fund schemes as on June30 2020, comprising

  1. Equity schemes(43.2%)
  2. Income schemes (14.5%)
  3. Hybrid schemes (14.1%)
  4. Liquid/ Money Market (28.2%)
  5. Solution oriented schemes (Retirement Funds, childrens fund; part of other AUM)
  6. Other schemes (ETF’s, Fund of Funds; part of other AUM)
  • As of June 30, 2020, UTI’s distribution network includes 163 UTI Financial Centres (UFCs), 257 Business Development Associates (BDAs) and ChiefAgents (CAs) (40 of whom operate Official Points of Acceptance (OPAs)) and 43 other OPAs, most of which are in eachcase located in B30 cities.
  • Manage retirement funds (in retirement solutions business, which manages the National Pension System (NPS)funds), offshore funds (including the Shinsei UTI India Fund, a co-branded fund with Shinsei Bank of Japan) and alternativeinvestment funds. These other businesses (excluding domestic mutual funds and PMS business) had an aggregateclosing AUM of 1523.4 billion as of June 30, 2020.
  • Digital initiatives taken to enhance the experience of customers and thus aid in retention and loyalty.

UTI AMC Financial Review/Financial Performance

The topline and the bottomline both are showing a declining trend since FY19. Total revenues for FY20 has reduced by 17% to Rs 890 crore (FY 19 : Rs 1080 crore).This is due to the adverse effects of the pandemic wherein clients have withdrawn mutual funds due to volatile equity markets.There has also been some reduction in inflows and SIP Live Folios and the mutual fund industry has also experienced SIP stoppages.

Domestic Mutual Fund QAAUM has decreased by 11.8%, inthe three-month period ended June 30, 2020 compared to the fiscal year ended March 31, 2020. However, the operating and the net margins are robust at 43% and 24% respectively in FY20. Debt to equity is very low for the AMC.

Table 1 - Financials and Ratios (Amount in Rs Crore)
Title Q1FY21 FY2020 FY2019 FY2018
Total Revenue 271.07 890.96 1080.89 1162.75
of which management fees 159.43 786.47 881.38 935.35
PAT 65.087 212.76 314.14 404.56
EBITDA 133.97 385.27 528.59 556.87
Total Accets 3263.42 3154.92 3013.26 2919.25
Cash flow from operating activities 15.14 194.72 122.71 268.56
Cash and cash equivalents 123.86 119.25 124.18 150.19
% of management fees to total rev 58.82% 88.27% 81.54% 80.44%
Operating Margin(%) 49.42% 43.24% 59.33% 47.89%
Net margin(%) 24.01% 23.88% 34.92% 34.79%

Conclusion

The listed peers of UTI AMC are HDFC AMC and Nippon Life Asset Management Limited as per RHP. However, other players in the industry are ICICI Prudential, Axis mutual fund, Aditya Birla Sun Life Mutual Funds among many others. The P/E of UTI is 25.73 at the upper price band which is low as compared to the industry peer P/E average of 38.64.This signifies that the IPO is attractively priced. At NAV of Rs 217.88 in FY20, P/BV is 2.54. Considering the strong brand of UTI and being the one of the large AMC, the proposed issue has garnered huge interest among the investors; thus it might bring in listing gains and long term growth as well.

Reviewer recommends Subscribing to the issue.

Review By CA Priyanka Choudhary on

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Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.


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