The Rs 2,160-crore initial public offering of UTI Asset Management Company, the second-largest AMC in India in terms of total AUM, has subscribed 26.8 percent so far on September 29, the first day of bidding.
The IPO has received bids for 73 lakh equity shares against offer size of 2.73 crore equity shares, the data available on the exchanges showed. The offer size excluded anchor book which received strong response on September 28 as the company has garnered Rs 645 crore.
The portion set aside for retail investors has subscribed 50.7 percent, while the reserved portion of non-institutional investors witnessed 5.8 percent subscription and that of employees 31.57 percent. Qualified institutional buyers' category saw 0.01 percent subscription.
The public issue consists entirely of offer for sale of 3,89,87,081 equity shares by State Bank of India, Bank of Baroda, LIC, Punjab National Bank and T Rowe Price International.
The offer includes a reservation of up to 2 lakh equity shares for eligible employees. The total offer would constitute at least 30.75 percent of the post-offer paid-up equity of the company.
The issue price band has been fixed at Rs 552-554 per share.
"At upper price band, IPO is priced at a P/E of 25.7x and P/AUM of 5.3 percent which is discount to its peers AMC (Nippon India P/E of 37.7x, P/AUM of 6.1 percent and HDFC AMC with P/E of 35.6x and P/AUM of 14.1 percent) based on FY20 due to lower return ratio (RoE at 10 percent). With focus on cost parameters and high dividend payouts (guided 50 percent versus 32.6 percent FY20) should result in improvement in return on equity (RoE) and thus valuation difference could decline," said IDBI Capital which recommended subscribing the issue.
UTI AMC is the second largest asset management company in terms of total AUM while it is eighth largest AMC in terms of mutual fund QAAUM as of June 2020.
With a total AUM of Rs 1.3 lakh crore as of June 2020, it commands a market share of 5.4 percent in the industry. Client base accounts of 12.2 percent (1.09 crore folio) out of total industry folio of 8.97 crore folio.
AMC revenues and PAT declined from FY18 to FY20 but has high shares of B-30 centers in AUM at 24 percent against 15.1 percent for the industry which provide growth opportunities, the brokerage said.
Religare Broking also expects UTI AMC to grow at a healthy pace from hereon given the positive industry growth prospects coupled with company's its size and diverse client base, strong product portfolio and, extensive distribution network. "Further, it has a long term track record of product innovation, stable and consistent performance."
Going forward, the company plans to drive up its investment performance and widen its geographical reach and continue to develop its other businesses.From a long-term perspective, Religare has a positive view on the company. Hence investors having long term investment plan can invest in the company, it advised.