UTI Asset Management Companylisted today at a discount of about 12 per cent to its issue price. The stock made its debut at ₹490.25 against its issue price of ₹554 a share on the BSE. The company’s share reached an intra-day high of ₹530, and an intra day low of ₹471.1.
Where it stands
At its issue price, UTI AMC was valued at about 25.4 times its FY20 earnings. As a percentage of its QAAUM (Quarterly Average Assets Under Management) as of June 2020, the issue was priced at 5.3 per cent.
Its other two listed peers — HDFC Asset Management Company (HDFC AMC) and Nippon Life Asset Management (Nippon AMC) — currently trade at a much higher 36-40 times their FY20 earnings. Even in terms of their QAAUM, the companies currently are priced at 12.6 and 8.6 per cent, respectively.
Post listing, the valuations of UTI AMC have dropped to 22 times (PE) and 4.5 per cent of QAAUM as of June 2020 (at the last traded price of ₹476.6.
Continuing decline in the market share of UTI AMC — down to 5.4 per cent as of June 2020 from 8.2 per cent in March 2014 (based on QAAUM); mediocre performance of the company’s funds and the industry wide near-term weakness in mutual fund inflows seem to have dimmed the appeal for investors. The other listed players in the AMC space garner better valuations on the back of better financial metrics when compared to UTI. While UTI AMC’s return on net worth in FY20 was 9.9 per cent, HDFC AMC and Nippon AMC posted a return of 31.3 and 16 per cent, respectively, on their net worth.
These factors in the financials of UTI AMC seem to overshadowed its positives such as comparatively higher share of AUM flowing from B-30 cities (indicating greater scope for growth) and greater share of individual customers — 46 per cent of AUM (reducing the risk of customer concentration).
Hence the IPO of the company was subscribed by only 2.11 times (compared to other recent IPOs that garnered subscriptions of 50-156 times). The IPO size was ₹2,155 crore entirely comprising of shares offered for sale by SBI, LIC, Punjab National Bank, Bank of Baroda and T Rowe Price International.