UTI AMC IPO (UTI Asset Management Company IPO) – Share Price, Valuations, Analysis and Review
Majority of the companies that have applied to SEBI for IPO are trying to speed track and encash in this bull run. If you are investing in Mutual Funds, you should be familiar with UTI Asset Management Company (AMC). UTI AMC IPO is one the largest AMC that is in the mutual funds business and also provides portfolio management services in India. This IPO is for Rs 2,160 Crores issue size and 7 BLRMs are the lead managers to this issue. Should you invest in UTI AMC IPO? What are the risk factors of investing in this IPO?
About UTI Asset Management Company Limited
They are the second largest asset management company in India in terms of Total AUM and the eighth largest asset management company in India in terms of mutual fund QAAUM as of June 30, 2020. As of June 30, 2020 they also had the largest share of its monthly average AUM attributable to B30 cities of the top ten Indian asset management companies by QAAUM as of June 30, 2020, according to CRISIL.
They cater to a diverse group of individual and institutional investors through a wide variety of funds and services. They manage the domestic mutual funds of UTI Mutual Fund, provide portfolio management services to institutional clients and high net worth individuals and manage retirement funds, offshore funds and alternative investment funds. As of June 30, 2020, its total QAAUM for its domestic mutual funds was Rs 1,336.3 billion, while our Other AUM was Rs 8,493.9 billion. With 10.9 million Live Folios as of March 31, 2020, its client base accounts for 12.2% of the approximately 89.7 million folios that, according to CRISIL, are managed by the Indian mutual fund industry. Its history and track record in the mutual fund industry, strong brand recognition, distribution reach, performance and client relationships provide a platform for future growth.
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UTI AMC IPO Details
Here are the IPO issue details.
|IPO Date||Sep 29, 2020 to Oct 1, 2020|
|Face Value||Rs 10 per equity share|
|IPO Price band||Rs 552 to Rs 554 per share|
|Issue Size||Total of Rs 2,159.8 Crores|
|IPO Lot Size||27 shares|
|Lead Managers||Kotak Mahindra Capital, Axis Capital, Citigroup Global Markets, BoFA securities, ICICI Securities, SBI Capital Markets and JM Financials|
|Listing at||BSE and NSE|
Objects of issue – UTI AMC IPO
Here are the objects of the IPO issue.
The objects of the offer are
i) To achieve the benefits of listing the equity shares on the Stock Exchanges and the sale of up to 38,987,081 equity shares by the selling Shareholders in the Offer.
ii) Further, the listing of equity shares will enhance company’s brand name and provide liquidity to the existing Shareholders. Company expects that the proposed listing will also provide a public market for the equity shares in India. The selling shareholders will be entitled to the entire proceeds of the offer after deducting the Offer expenses and relevant taxes thereon.
Company will not receive any proceeds from the Offer.
Who are the company promoters?
UTI AMC is a professionally managed company and does not have an identifiable promoter in terms of SEBI ICDR Regulations and the Companies Act.
Here is the summary of the financial information of the company.
|Total Revenues (Rs in Crores)||Profits after tax
(Rs in Crores)
Its EPS for FY2020 is Rs 21.53 and last 3 years average EPS is Rs 24.83.
What are the key strengths of UTI AMC Limited?
Every investor should understand the company’s key strengths so that one can compare with its competitors to know how unique is such company in their business. Their investment decision would change based on these facts. Here are the key strengths of the company.
1) Well-positioned to capitalise on favourable industry dynamics, including the under penetration of mutual fund products.
2) Pure-play independent asset manager with strong brand recognition and diverse portfolio of funds and services.
3) Multiple distribution channels with wide reach and broad and stable client base.
4) Long-term track record of product innovation, consistent and stable investment performance and AUM growth.
5) Established position in retirement solutions through product innovation and large retirement fund mandates.
6) Experienced management and investment teams supported by strong governance structures and human resources programs.
7) Enhanced profitability driven by its size and product mix.
What are the various strategies of UTI AMC Ltd?
Company strategies would help investors to know what company is intending to do in the future and whether these strategies would help in revenue or margin growth. Such information would help investors to decide whether to invest for short term, medium term or for the long term. Here are the company strategies.
1) Drive superior investment performance across its categories of funds.
2) Increase geographical reach and expand distribution channels.
3) Actively pursue additional partnership opportunities.
4) Continue to develop PMS, offshore and alternative funds businesses.
5) Leverage technology and digitization to enhance organizational efficiency and cost optimization, improve customer acquisition and experience, and ensure data security.
6) Continue to attract, retain and develop human capital.
Reasons to invest in this IPO
Here are a few reasons to invest.
1) UTI AMC is the second largest asset management company in India in terms of Total AUM and the eighth largest asset management company in India in terms of mutual fund QAAUM.
2) Its products/services are diversified. It offers a diversified portfolio of mutual fund schemes as well as portfolio management services, retirement solutions and alternative investment funds (AIFs).
3) Company generates high margins. Its margins are 31% for FY2020.
Risk Factors of investing in this IPO
These risk factors can impact company revenue and margins which would affect its share price. Investors should go through these points and understand them before investing.
1) Its revenues are on declining mode. Its revenues were at Rs 1,162 Crores for FY2018 Vs Rs 890 Crores for FY2020.
2) Company income and profit are largely dependent on the value and composition of its AUM, which may decline because of factors outside its control.
3) Under performance of its investment portfolio could lead to a loss of clients and reduction in AUM and result in a decline in its income.
4) Its market share has declined consistently over the past years and may continue to do so, which could have an adverse impact on its business, financial condition and results of operations.
5) Concentration in its investment portfolio could have a material adverse effect on its business, financial condition and results of operations.
6) For complete internal and external risk factors, you can refer the RHP of the company.
How to apply for UTI AMC IPO?
You can follow these steps to apply for this IPO
1) Login to your demat account
2) Visit IPO section
3) Check for UTI AMC IPO link and click to bid
4) Select the IPO price and select bid Qty and submit
UTI AMC IPO Promoter Holding
Pre-issue share holding – 98.96%
Post issue share holding –
UTI AMC IPO GMP / Grey Market Price
This IPO GMP is fluctuating heavily. As of September 24, 2020, GMP was between Rs 140+ to Rs 150+. Till a few days back UTI AMC IPO GMP was over Rs 1,000 and it has been going down.
UTI AMC IPO Tentative Dates / Timetable
|Finalization of Basis of Allotment||07-Oct-20|
|Unblocking of ABSA and Initiation of Refunds||08-Oct-20|
|Credit of shares to Demat Accounts||09-Oct-20|
|IPO Shares Listing Date||12-Oct-20|
UTI AMC IPO price valuations
1) On the upper price band of Rs 554 and EPS of Rs 21.53 for FY20, the P/E ratio works out to be 25.7x.
2) For last 3 years EPS of Rs 24.8, the PE ratio is 22.3x.
3) Means, the company is asking the issue price of Rs 554 of the upper price band in the P/E range of 22.3x to 25.7x.
4) There are listed peers like Nippon Life AMC, whose shares are trading at P/E of 40.7x (Highest) and HDFC AMC at P/E of 36.5x (Lowest) and the industry average is 38.6x. Hence as per above analysis, the company issue price of Rs 554 at P/E of 22.3x to 25.7x is reasonably priced.
UTI AMC IPO – Should you invest?
UTI AMC is one of the largest AMC in India. It generates high margins. However, its revenues are on a declining trend. Its share price is reasonably priced. There are almost 7 large BLRMs who are acting as lead managers to this issue. Investors should consider these points before investing in this IPO.
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