UTI AMC IPO: Oldest Player in AMC Business. Should you Subscribe?

There is no denying the fact that promoters of the unlisted companies have chosen September month to enjoy listing gains as UTI AMC is the second most awaited IPO of this year after SBI Cards and sixth IPO afterHappiest Minds, Route Mobile, Computer Age Management Services, Chemcon Speciality Chemicals and Angel Broking Limited. The company has drafted the Red Harring Prospectus (RHP) to raise Rs. 3,000 crore in the primary market. The issue is a complete Offer for Sale (OFS) in which State Bank of India, Bank of Baroda, and LIC will divest 8.25% stake each while T.Rowe Price International and Punjab National Bank will sell 3% out of their total stake. The sole purpose of the object is to achieve the benefits of listing.

The object of the Offer for Sale is to allow the shareholders to sell an aggregate of up to 38,987,081 Equity Shares held by them of Face Value ₹10 aggregating up to ₹2156.00 Cr. at the upper price band of Rs. 554.

UTI AMC IPO Details:

  • Issuer Company: UTI Asset Management Company
  • Industry: Financial Services
  • IPO Size: 2,152-2,156 cr.
  • Price Band: 552-554
  • Issue Open Date: 29 Sep, 20
  • Issue Close Date: 01 Oct, 20
  • Listing Date: 12 Oct, 20
  • Minimum Lot Size: 27 shares
  • Employee Discount: NA
  • Face Value: 10 RS. Per share
  • Retail Allocation: 35%
  • Listing Exchange: NSE, BSE

About the Company:

Unit Trust of India (UTI) Asset Management Company (AMC) is the first asset management company in India with a history of more than 55 years. In order to reach PAN India, the company has established 163 UTI Financial centers, 273 Business Development Associates and Chief Agents and 33 other Official Points of Acceptance. The company has approximately 51,000 Independent Financial Advisors.  UTIAMC is professionally managed company having four sponsors: State Bank of India, Life Insurance Corporation, Punjab National Bank and Bank of Baroda. The company is considered as a global asset management company having T. Rowe Price International Ltd in the list of major stakeholders which is controlling 26% stake in the Company. As per the data from CRISIL, UTI AMC is the largest AMC in India in terms of Total AUM, seventh-largest AMC in India in terms of mutual fund QAAUM with ₹1,542.3 billion, and also has the largest share of monthly average AUM amongst top ten Indian AMC coming from B30 cities.

Peer Comparison:

In the unlisted space, the company has number of competitors such as SBI MF, ICICI Pru MF, HDFCAMC, NAM India, ABSL MF, Kotak AMC and Franklin Templeton MF etc. While in the listed space, the rookie AMC will face competition from HDFCAMC, NAM India, IDFC and Edelweiss Financial Services.

SWOC Analysis:

Strength: UTI AMC has been the second -most awaited IPO after SBI Cards this year. The company has a strong reach in PAN India due to itsestablished 163 UTI Financial centers, 273 Business Development Associates and Chief Agents and 33 other Official Points of Acceptance. The main strength of the company comes from its long time history and reliability of the investors due to its promoters holding under the Government of India. As per CRISIL, UTI is seventh-largest AMC in India in terms of mutual fund QAAUM with ₹1,542.3 billion, and also has the largest share of monthly average AUM amongst top ten Indian AMC. The company has established distribution channels and managing marquee investors such as Employees Provident Fund Organization, Coal Mines Provident Fund Organization, Postal Life Insurance, and Employees’ State Insurance Corporation.

Weakness: The major weakness of the company is orthodox vision and products portfolio offered. Majority of the Asset under Management are invested in debt funds. While, Asset under Management in equity segment is 32% much lower than the industry average of 39%. The management of assets in equity segment claims high expense ratio which in turn results in high management fees and profitability but more banking upon debt instruments has restricted their revenues. The unavailability of private management system has also dampened the structure of the company. Despite, the established distribution channel, the company has failed to generate increments in AUM in last three years.

Opportunities: The mutual fund industry in India is highly less penetrated that there is huge opportunity of increase in business in the upcoming years. Indian economy is known for following the footprints of western countries and western countries are highly favored for mutual funds industry rather than channelizing funds in banks in the form of fixed deposits and recurring deposits. Moreover, the falling interest rates and rising salary structure of employees in public and private organization will result in more funds channelization in mutual funds.

Challenges: There is no denying the fact that many public and private sector banks and foreign financial institutions have entered into the mutual funds industry in India. These companies have diversified offering for the investors. Moreover, their distribution channel structure and advertisement culture is very much unconventional which is expected to give a tough competition to the UTI AMC. After listing on the Indian bourses, the company will face competition from Nippon AMC and HDFC AMC.

For more details, it would be recommendable to go through the red herring prospectus. You can also go through the UTI AMC IPO Details to get deep insights into the company’s performance, financials and expert advice.

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