Angel Broking's IPO report on UTI Asset Management Company
UTI AMC, the second largest AMC in India in terms of total AUM, is 8 th largest in terms of QAAUM (`1,33,600cr) as of June 30, 2020. In terms of live folios, UTI AMC accounts for 12.2% of the 89.7mn industry folios as of March 31, 2020. Huge growth potential in Mutual Fund AUM: Over the past five years (FY2015- 20), equity AUM for the Indian MF industry has increased 2.7x from `3.24 lakh cr to `9 lakh cr. Further, overall AUM has nearly jumped 2.4x from `11.48 lakh cr to `27.14 lakh cr over the same period. There is a huge growth potential for MF industry as the penetration of mutual funds is low in India with an AUM/GDP ratio of 11% as of March 2020 vs. that of developed countries at >50%. Lower attraction in real estate by investors due to subdued returns coupled with lower inflation will direct investors from physical assets to financial savings, resulting in MF AUM to grow at a healthy rate.
Valuation and Outlook
At the upper end of the IPO price band, it is offered at 25.4x its FY20 earnings and 5.25% of Q1FY21 QAAUM, demanding `7,024cr market cap, which we believe is reasonable. Further, listed peers like HDFC AMC trades at 35x FY20 earnings and Nippon AMC trades at 37x FY20 earnings. Additionally, HDFC and Nippon AMC trade at 12.56% and 8.55% of Q1FY21 QAAUM, respectively. Considering attractive valuation, huge growth potential of MF industry, asset-light business and higher dividend payout ratio, we are positive on this IPO and rate it as SUBSCRIBE.
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