UTI Asset Management Company (AMC) share price hit an over two-year high of Rs 1,119 on the BSE on Tuesday, August 20, 2024. This comes after UTI AMC share rallied 6 per cent in the intraday trade today on earnings improvement.
The stock surpassed its previous high of Rs 1,113.80 touched on July 16. The stock was trading at its highest level since November 2021. The stock had hit a record high of Rs 1,216.55 on August 31, 2021.
UTI AMC is Investment Manager to UTI Mutual Fund. UTI AMC is registered as Portfolio Manager with market regulator Securities and Exchange Board of India (Sebi) and, through its subsidiary, it acts as Fund Manager for Alternative Investment Fund (AIF) among others. It also has a countrywide network of branches along with a diversified distribution network.
As of June 30, 2024, the total assets under management (AUM) for UTI AMC stood at Rs 19.36 trillion, which includes the mutual fund’s asset base of Rs 3.1 trillion.
In the April to June 2024 quarter (Q1FY25), UTI AMC reported a nine per cent growth in profit after tax (PAT) to Rs 254 crore, as against Rs 234 crore in the same quarter a year ago.
The company’s total revenue from operations rose 13 per cent to Rs 529 crore during the quarter under review, as compared to Rs 468 crore in the April-June quarter of the preceding financial year (2023-24).
The Indian mutual fund industry has witnessed robust growth in the recent past, making it amongst the most attractive investment avenues. The management believes that UTI AMC is suitably placed to capitalise on the opportunities in the MF industry’s expanding investment inflows.
In the long term, i.e., between fiscal 2024 and fiscal 2029, the overall industry’s AUM is projected to sustain a high growth trajectory of 17-18 per cent CAGR, reaching approximately Rs 120 trillion.
“This growth in the mutual fund industry is expected to be driven by the technological advancements, digitisation and rising internet and smartphone penetration facilitating ease of investments and distribution of mutual funds; rising popularity of SIPs with majority of unique investors choosing SIP route for entering mutual funds market; rising inflows in thematic or sectoral mutual funds schemes with increased risk appetite of investors and higher disposable income and investable household surplus,” UTI AMC had said in its FY24 annual report.
UTI AMC shareholders
Meanwhile, Punjab National Bank (15.18 per cent) and State Bank of India, Bank of Baroda and Life Insurance Corporation of India (9.95 per cent each) collectively held 45.03 per cent stake in UTI AMC.
Post-IPO, T Rowe Price International (a global investment management firm) is the largest shareholder with ~23 per cent stake in UTI AMC. T Rowe Price also owns a major stake in UTI Trustee Company.
With the rising importance of financial savings among Indian households, along with under-penetration and concentrated business model of mutual funds, the outlook for AMCs in India remains buoyant. Considering the improving efficiency of UTI AMC, T Rowe Price (already being an investment manager) can opt to buy majority stake from public sector banks (the easiest route) and can become the promoter, analysts at IncCed Research Services said in their Q1FY25 result update.
UTI AMC reported a superior Q1FY25 PAT (up 51 per cent quarter-on-quarter) led by improved revenue yield on the back of growth in better yield equity funds’ AUM (up 21.7 per cent year-on-year) and hybrid funds’ AUM (up 29.7 per cent Y-o-Y).
The expenses, on the other hand, were down by 5 per cent Q-o-Q. Management has been trying to moderate operating expenses, which was visible during the quarter, but sustainability of the same is a key monitorable.
That said, UTI AMC reported a decline in its overall market share sequentially at ~5.27 per cent against ~5.37 per cent in March 2024 as mutual fund QAAUM stood at Rs 3.11 trillion (up 25.2 per cent Y-o-Y) in June 2024.
Analysts at InCred Equities said they like UTI AMC considering the improving performance of its schemes leading to steady inflow and healthy AUM, rationalisation of operating expenses to strengthen operating performance and a favourable risk-reward ratio.
“We retain ADD rating on the stock with a higher target price of Rs 1,200 (Rs 1,100 earlier), corresponding to ~13.8x FY26F EPS,” the brokerage firm said.
First Published: Aug 20 2024 | 12:13 PM IST
