UTI AMC has penetrated well into in the B30 cities as its 250+ development officers and Chief Agents are based in B30 cities.
UTI Asset Management Company, as expected, started off first day of trade on a tepid note as it was listed with 9.5 percent discount to its issue price on October 12.
The stock was down 9 percent at Rs 504.15 compared to issue price of Rs 554, but gained 2.84 percent over opening price on the BSE with 6.91 lakh shares volume at 11:34 hours IST.
Though the weak listing was on expected lines due to tepid response to IPO and outflow in the mutual fund industry for last three months, experts advised holding on to UTI AMC, the second largest asset management company in India in terms of total AUM and eight largest in India with domestic QAAUM (quarterly average AUM) of Rs 1.33 lakh crore.
"Investors should hold on to UTI AMC owing to a) it has the potential to regain its market share and increase return ratio. b) Board has approved a higher dividend policy which will also help to some extent improve the return ratio. AMC business is an asset-light business, hence investors can expect steady and healthy divided. c) UTI AMC has a well-diversified and strong presence in B30 cities, where Sebi has allowed charging additional 30 bps and these inflows are sticky. d) Lower valuation compared to listed peers," Jaikishan Parmar- Senior Equity Research Analyst at Angel Broking told Moneycontrol.
UTI AMC has penetrated well into in the B30 cities as its 250+ development officers and Chief Agents are based in B30 cities. The 24 percent of its overall AUM in B30 geographies, UTI has the highest concentration in B30 markets among the Top 10 AMCs.
Its FY20 profitability was a bit compressed largely owing to decline in management fees of about Rs 52 crore due to issues in the debt mutual fund business; in some of the high-yield fixed-income funds, fresh subscriptions were stopped and exit load was reduced; and marked-to-market (MTM) loss on treasury investments.
The mutual fund industry has witnessed outflow for the last three months and equity mutual funds for three months.
However, "we expect there is a huge growth potential for the mutual fund industry as the penetration of mutual funds is low in India with an AUM/GDP ratio of 12 percent as of December 2019 versus that of developed countries at over 50 percent. Lower attraction in real estate by investors due to subdued returns will direct investors from physical assets to financial savings, resulting in MF AUM to grow at a healthy rate," Jaikishan Parmar said.
UTI AMC also provides portfolio management services (PMS) to institutional clients and high net worth individuals (HNI), manage retirement funds, offshore funds and alternative investment funds (AIF). As of June 2020, in term of AUM - the company is the second largest PMS provider in India.
Astha Jain, Senior Research Analyst at Hem Securities also advised that those with short term horizon should book profit on day of listing if by any chance price goes above issue price, otherwise can hold for long term horizon as company is pure play independent asset manager with strong brand recognition & diverse portfolio of funds with multiple distribution channels, wide reach, broad and stable client base.
In case of mutual fund industry, Q1 FY21 saw a drop in AUM as a result of the nationwide lockdown and overall capital markets performance.
"Due to pandemic led destruction, mutual fund quarterly AAUM growth is expected to be near-flat for FY21. However, post FY21, quarterly AAUMs are expected to gradually bounce back and grow to approximately Rs 52 lakh crore by March 2025 (i.e. a growth of around 18 percent CAGR between March 2021 and March 2025)," Choice Broking said.
UTI AMC's Rs 2,160-crore IPO witnessed 2.3 times subscription, the lowest amongst IPOs launched so far in 2020. As it was an offer for sale, all issue proceeds were received by shareholders - SBI, LIC, Bank of Baroda, PNB and T Rowe Price International.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.