1
Please refer to important disclosures at the end of this report
1
1
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.
Healthy financials to support aid dividend payout: UTI AMC reported EBITDA
margin of 36% for FY20 and average RoE for last 3 years stood at 13.5%.
Primary reason for subdued RoE is lower dividend payout (20%) vs. listed players
payout ratio of more than 50%. However, management has indicated that from
FY2020 they will consider increasing dividend payout ratio substantially.
There is possibility of EBITDA margin to improve: UTI AMC’s operational
profitability is lower vs. listed peers primarily owing to higher cost. With growth in
AUM, we expect cost to grow at slower speed, which will benefit operating
leverage and will help the company to improve EBITDA margins.
Outlook & Valuation: 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.
Key Financials
Y/E March (` cr)
FY2018
FY2020
Net Sales
967
788
% chg
(12)
Net Profit
405
276
% chg
(21)
EBITDA (%)
40
36
EPS (`)
32
22
P/E (x)
17
25
ROE (%)
17
10
Valuation done at higher band price
SUBSCRIBE
Issue Open: Sep 29, 2020
Issue Close: Oct 1, 2020
QIBs 50% of issue
Non-Institutional 15% of issue
Retail 35% of issue
Promoters 0%
Others 100%
Post Issue Sh areholding Pattern
Post Eq. Paid up Capital: `127cr
Issue size (amount): *`2,152cr -
**2,160 cr
Price Band: `552-554
Lot Size: 27 shares and in multiples
thereafter.
Post-issue implied mkt. cap: *`6,999cr
- **`7024cr
Promoters holding Pre-Issue: 0%
Promoters holding Post-Issue: 0%
*Calculated on lower price band
** Calculated on upper price band
Book Building
Fresh issue: -
Issu e D etails
Face Value: `10
Present Eq. Paid up Capital: `127cr
Offer for Sale: **3.9cr Shares
Jaikishan J Parmar
Research Analyst
+022 39357600, Extn: 6810
[email protected]ngelbroking.com
UTI Asset Management Company Limited
IPO Note | Financials
Sep 28, 2020
2
UTI Asset Management Company Limited I PO Note
Sep 28, 2020
2
Company Details
UTI AMC is the seond largest AMC in India in terms of total AUM and the 8
th
largest in terms of QAAUM (`1,33,600cr) as of Q1FY21. In terms of live folios,
UTI AMC accounts for 12.2% of the 89.7mn industry folios as of Q4FY20.
UTI AMC manages 153 domestic mutual fund schemes comprising equity, hybrid,
income, liquid and money market funds.
As of Q1FY21, its distribution network includes 163 UTI Financial Centres, 257
Business Development Associates and Chief Agents (40 of whom operate Official
Points of Acceptance) and 43 other OPAs, most of which are located in B30 cities.
Its IFA channel includes approximately 53,000 Independent Financial Advisors
(“IFAs”) as of Q1FY21.
Exhibit 1: UTI MF AUM mix (%)
Source: Company
Key Management Personnel:
Imtaiyazur Rahman is the whole-time Director and the Acting Chief Executive
Officer of the company. He has over 30 years of experience in management,
business leadership and forming strategic alliance. He is associated with the
company since 2003.
Surojit Saha is the Chief Financial Officer of the company. He joined erstwhile UTI
on December 05, 1990 and was subsequently transferred to the company with
effect from January 15, 2003.
Amandeep Singh Chopra is the Group President and Head of Fixed Income of the
company. He joined erstwhile UTI on June 27, 1994 and was subsequently
transferred to the company with effect from January 15, 2003.
Vetri Subramaniam is the Group President and Head of Equity of the company. He
joined the company with effect from January 23, 2017.
1%
1%
1%
2%
6%
11%
15%
17%
28%
33%
29%
26%
27%
28%
29%
30%
70%
65%
70%
70%
64%
58%
53%
51%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
FY14
FY15
FY16
FY17
FY18
FY19
FY20
Q1FY21
Hybrid
ETF
Equity
Debt
3
UTI Asset Management Company Limited I PO Note
Sep 28, 2020
3
Issue details
This IPO is purely an offer for sale and the issue is worth `2,160cr at upper price
band. Total 38,987,081 equity is being offered through this IPO and company has
kept 2,00,000 shares for employee reservation.
State Bank of India, Punjab National Bank, Bank of Baroda, Life Corporation of
India, and T Rowe Price International will reduce their stake in UTI AMC. SBI, BoB,
and LIC will divest 8.25% stake each, while T Rowe Price International and Punjab
National Bank will sell 3% each through the issue.
According to Sebi’s cross-holding norms for mutual funds, the sponsor of one
AMC cannot hold more than 10% in another. To meet the above regulatory
requirement SBI, BoB and LIC are trimming their stake.
Exhibit 2: Pre and Post-IPO shareholding pattern
No of shares (Pre-issue)
%
No of shares (Post-issue)
%
12,67,87,254
100
8,78,00,173
69
-
3,89,87,081
31
12,67,87,254
100
12,67,87,254
100
Source: RHP Note,: Calculated on upper price band
Exhibit 3: Details of equity shareholding of the Shareholders Pre and Post-IPO
Shareholder
Pre Offer
Post Offer
Number of Equity
Shares
% of the pre-Offer
Equity Share capital
(%)
Offer for Sale
Number of Equity
Shares
% of the pre-Offer
Equity Share capital
(%)
T. Rowe Price International
3,29,64,686
26.0
38,03,617
2,91,61,069
23.0
State Bank of India
2,31,25,000
18.2
1,04,59,949
1,26,65,051
10.0
Life Insurance Corporation
2,31,25,000
18.2
1,04,59,949
1,26,65,051
10.0
Bank of Baroda
2,31,25,000
18.2
1,04,59,949
1,26,65,051
10.0
Punjab National Bank
2,31,25,000
18.2
38,03,617
1,93,21,383
15.2
Other Investor
13,22,568
1.0
4,03,09,649
31.8
Total
12,67,87,254
100.0
3,89,87,081
12,67,87,254
100.0
Source: RHP Note
Objects of the offer
To meet SEBI cross holdings norms for mutual fund, i.e. the sponsor of one
AMC cannot hold more than 10% in another. To meet above regulatory
requirement SBI, BoB and LIC are trimming their stake.
To achieve the benefits of listing the Equity Shares on the Exchanges and to
carry out offer for sale of equity shares.
Risk
Employee-related litigation could hit balance sheet adversely.
Major revenue comes from charging Asset management fess and any
continuous decline in AUM or regulatory change in fees could adversely
impact profitability of UTI AMC.
4
UTI Asset Management Company Limited I PO Note
Sep 28, 2020
4
Exhibit 4: Relative Valuation
Q1FY21
FY20
FY18
FY19
FY20
Dividend
AMC
AUM
Mcap
PAT
PE
Mcap/AUM
PAT/AUM
ROE
Pay Out
Equity Mix
Retail
B 30
HDFC
3,56,710
44,792
1,262
35
12.6
0.26
0.29
0.34
35.5
50.0
41.0
18.0
13.5
Nippon
1,81,048
15,400
415
37
8.5
0.19
0.20
0.26
16.1
74.0
39.0
24.0
17.5
UTI
1,33,631
7,024
277
25
5.3
0.27
0.22
0.18
10.3
22.0
32.1
28.0
26.0
Source: Company, Valuation done on CMP of 24
th
Sep, for UTI upper IPO price.
Exhibit 5: Opearting Parameter
AMC
FY18
FY19
FY20
PAT/AUM
PAT/AUM
PAT/AUM
Motilal
0.31
0.39
0.54
HDFC
0.26
0.29
0.34
ICICI
0.22
0.22
0.30
Nippon
0.19
0.20
0.26
Ab Capital
0.15
0.18
0.20
Kotak
0.07
0.17
0.18
SBIN
0.17
0.17
0.18
UTI
0.27
0.22
0.18
AXIS
0.06
0.06
0.10
IDFC
0.08
0.07
0.08
Source: Company
5
UTI Asset Management Company Limited I PO Note
Sep 28, 2020
5
Income Statement
Y/E March (` cr)
FY2018
FY2019
FY2020
Q1FY21
Net Sales
967
891
788
160
% chg
(7.9)
(11.5)
Total Expenditure
581
552
506
137
Personnel
321
307
340
98
Operating Exp
257
244
163
38
Others Expenses
4
2
3
1
EBITDA
386
338
282
23
% chg
(12.2)
(16.6)
(% of Net Sales)
39.9
38.0
35.8
14.2
Depreciation& Amortisation
27
29
31
8
EBIT
358
309
251
14
% chg
(13.7)
(18.9)
(% of Net Sales)
37.1
34.7
31.8
Interest & other Charges
9
8
8
2
Other Income
196
190
103
111
(% of PBT)
35.9
38.7
29.8
Share in profit of Associates
-
-
-
Recurring PBT
545
491
345
123
% chg
(9.9)
(29.7)
Tax
140
143
69
22
(% of PBT)
25.7
29.2
20.0
18.0
PAT (reported)
405
348
276
101
ADJ. PAT
405
348
277
101
(% of Net Sales)
41.9
39.1
35.1
63.3
Basic EPS (Rs)
32.0
27.4
21.8
Source: Company
6
UTI Asset Management Company Limited I PO Note
Sep 28, 2020
6
Balance sheet
Y/EMarch(`cr)
FY2018
FY2019
FY2020
Q1FY21
SOURCES O FFUNDS
Equity Share Capital
127
127
127
127
Reserves & Surplus
2,241
2,478
2,636
2,708
Shareholders Funds
2,367
2,604
2,762
2,835
Minority Interest
70
37
11
11
Financial Laibility
154
159
176
178
Provision
106
92
83
130
Total Liabilities
2,698
2,893
3,032
3,154
APPLICATIONOFFUNDS
Net Block
270
264
261
258
Intangible assets
97
87
102
108
Investments
2,179
2,261
2,356
2,457
Current Assets
333
344
366
363
Inventories
-
-
-
-
Sundry Debtors
55
64
55
51
Cash
150
124
119
124
Loans & Advances
36
28
37
36
Other Assets
92
128
154
151
Current liabilities
221
121
123
109
Net Current Assets
112
223
243
254
Deferred Tax Asset
17
32
46
50
Other Asset
23
25
23
27
Total Assets
2,698
2,893
3,032
3,154
Cash Flow Statement
Y/E March (` cr)
FY2018
FY2019
FY2020
Q1FY21
Profit before tax
545
491
345
123
Depreciation
27
29
31
8
Change in Working Capital
28
(83)
(42)
10
Interest / Dividend (Net)
1
(6)
(10)
(1)
Direct taxes paid
(161)
(167)
(75)
(17)
Others
(173)
(141)
(55)
(108)
Cash Flow from Operations
269
123
195
15
(Inc.)/ Dec. in Fixed Assets
(12)
(7)
(22)
(1)
(Inc.)/ Dec. in Investments
(142)
(19)
(84)
(15)
Cash Flow from Investing
(154)
(26)
(106)
(16)
Issue of Equity
0
0
0
0
Inc./(Dec.) in loans
(51)
(44)
(32)
3
Dividend Paid (Incl. Tax)
(51)
(63)
(63)
0
Interest / Dividend (Net)
28
(15)
2
3
Cash Flow from Financing
(75)
(123)
(94)
6
Inc./(Dec.) in Cash
40
(26)
(5)
5
Opening Cash balances
110
150
124
119
Closing Cash balances
150
124
119
124
7
UTI Asset Management Company Limited I PO Note
Sep 28, 2020
7
Key Ratio
Y/E March
FY2018
FY2019
FY2020
Valuation Ratio (x)
P/E (on FDEPS)
17.3
20.2
25.4
P/CEPS
16.2
18.6
22.8
P/BV
3.0
2.7
2.5
Dividend yield (%)
0.7
0.9
0.9
EV/Sales
5.0
5.4
6.0
EV/EBITDA
12.6
14.2
16.7
EV / Total Assets
1.8
1.7
1.6
Per Share Data (`)
EPS (Basic)
32.0
27.4
21.8
EPS (fully diluted)
32.0
27.4
21.8
Cash EPS
34.1
29.7
24.3
DPS
4.0
5.0
5.0
Book Value
186.7
205.4
217.9
Returns (%)
ROCE
14.2
11.2
8.5
Angel ROIC (Pre-tax)
185.8
81.7
54.2
ROE
17.1
13.4
10.0
Turnover ratios (x)
Asset Turnover (Gross Block)
2.6
2.5
2.2
Inventory / Sales (days)
-
-
-
Receivables (days)
21
26
26
Payables (days)
61
29
31
Working capital cycle (ex-cash) (days)
(40)
(3)
(5)
Valuation done on higher price band
8
UTI Asset Management Company Limited I PO Note
Sep 28, 2020
8
Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
Angel Broking Limited (hereinafter referred to as “Angel”) is a registered Member of National Stock Exchange of India Limited, Bombay
Stock Exchange Limited, Metropolitan Stock Exchange Limited, Multi Commodity Exchange of India Ltd and National Commodity &
Derivatives Exchange Ltd It is also registered as a Depository Participant with CDSL and Portfolio Manager and Investment Adviser with
SEBI. It also has registration with AMFI as a Mutual Fund Distributor. Angel Broking Limited is a registered entity with SEBI for Research
Analyst in terms of SEBI (Research Analyst) Regulations, 2014 vide registration number INH000000164. Angel or its associates has not
been debarred/ suspended by SEBI or any other regulatory authority for accessing /dealing in securities Market. Angel or its
associates/analyst has not received any compensation / managed or co-managed public offering of securities of the company covered
by Analyst during the past twelve months.
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should
make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the
companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine
the merits and risks of such an investment.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals. Investors are advised to refer the Fundamental and Technical Research Reports available on our website to evaluate the
contrary view, if any
The information in this document has been printed on the basis of publicly available information, internal data and other reliable
sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way
responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report.
Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify,
nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While
Angel Broking Limited endeavors to update on a reasonable basis the information discussed in this material, there may be regulatory,
compliance, or other reasons that prevent us from doing so.
This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,
redistributed or passed on, directly or indirectly.
Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in
connection with the use of this information.