Research Recommendation of Listing Gain UTI Asset Management Company Ltd.

UTI AMC manage the domestic mutual funds of UTI Mutual Fund, provide portfolio management services (PMS) to institutional clients and HNIs, and manage retirement funds, offshore funds and alternative investment funds. UTI is the second largest asset management company in India in terms of Total AUM considering mutual funds, PMS and NPS assets and the eighth largest asset management company in India in terms of mutual fund. As of June 30, 2020, total QAAUM for domestic mutual funds was Rs1,336.3 billion, while Other AUM was Rs. 8,493.9 billion.

Selling Shareholder- SBI, LIC, BOB, PNB and T. Rowe Price Group

Financial Performance:

Shareholding Pattern:

Source: DRHP, EWAL Research

Strengths:

• Well-positioned to capitalize on favorable industry dynamics, including the under penetration of mutual fund products.

• Pure-play independent asset manager with strong brand recognition and diverse portfolio of funds and services.

• Long-term track record of product innovation, consistent and stable investment performance and AUM growth.

Key Highlights:

• AUM for PMS business increased from Rs.1,158.5 billion as of March 31, 2018 to Rs. 6,890.6 billion as of March 31, 2020, representing a CAGR of 143.9%.

• Domestic individual investors represent 43.8% and corporate and other institutional investors represent 45.4% of Domestic Mutual Fund Closing AUM as of June 30, 2020

• Schemes representing 92.3% of the closing AUM invested as of June 30, 2020 in six core equity strategies.

• Market share of UTI has fallen from 8.2% to 5.4% over the period of March 31, 2014 to June 30, 2020.

• Management fees for the fiscal years ended March 31, 2020 was Rs.7.9 billion representing 88.3% total consolidated income for such period.

Risk Factors:

• Income and profit are largely dependent on the value and composition of AUM, which may decline because factors outside company control.

• Underperformance of investment portfolio could lead to a loss of clients and reduction in AUM and result in a decline in income.

• The asset management industry is intensely competitive, and increased competition has affected and in the future can further adversely affect market share of the company.

Outlook:

UTI AMC cater to diverse group of individual and institutional investors through a wide variety of funds and services and has the largest share of monthly average AUM in B30 cities among the top 10 AMCs in India. CRISIL expects industry QAAUM to grow at a CAGR of 18% between March 31, 2021 and March 31, 2025. Domestic Mutual Fund QAAUM of UTI decreased from Rs.1,578.7 billion as of June 30, 2019 to Rs. 1,336.3 billion as of June 30, 2020. At the higher end of the price band of Rs. 554, the stock will be available at a PE multiple of 25.7x on FY20 EPS. Listed Peers HDFC AMC trades at 35x FY20 EPS while Nippon AMC trades at 37x FY20 EPS. Hence UTI AMC is available at attractive valuation however Considering the Risk Factors and Financial performance of the company over the three years, we would recommend listing gain to this IPO.

 DISCLOSURE IN PURSUANCE OF SECTION 19 OF SEBI (RA) REGULATION 2014

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