UTI AMC’s ₹2,160 crore IPO opens today — Here’s all you need to know

UTI AMC will be the third AMC to get listed on the stock exchanges.UTI AMC
  • The IPO will remain open for subscribers until October 1.
  • The 17-year old company is backed by some marquee shareholders such as— SBI, LIC, Punjab National Bank, Bank of Baroda, and the US-based T Rowe Price.
  • Here's what brokerage firms have to say about UTI AMC IPO.
  • Check out the latest news and updates on Business Insider.
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The Mutual Fund manager, UTI Asset Management Company, is set to float its ₹2,160 crore IPO in the market today (September 29). And, the grey market is already pegging a premium of ₹55-60 over the issue price of ₹552-554 per equity share.

UTI AMC garnered ₹644.64 crore from several anchor investors including Morgan Stanley, Invesco Trustee, Avendus, Tara Emerging Asia Liquid Fund, Goldman Sachs, Nomura Singapore, HSBC, Kotak Funds among others to name a few.

The IPO will remain open for subscribers until October 1. The shares of the UTI AMC will list on both the stock exchanges, BSE and NSE.

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The 17-year old company is backed by some marquee shareholders such as— SBI, LIC, Punjab National Bank, Bank of Baroda, and the US-based T Rowe Price. The company is the second-largest Asset Management Company in India in terms of total assets under management and the eighth largest asset management company in India in terms of mutual funds as of June 30. It manages 153 domestic mutual fund schemes comprising equity, hybrid, income, liquid and money market funds.

The initial public offering aims to achieve the benefits of listing the equity shares on stock exchanges. It is worthy to note that the selling shareholders will get a part of the proceeds, and UTI will not.


Here's what brokerage firms have to say about UTI AMC IPO:

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Sector poised to grow

According to HDFC Securities, the Indian mutual fund industry is expected to continue to grow due to supportive industry dynamics and long-term structural drivers, including the increasing financialisation of household savings, market penetration of mutual fund products, and favourable population and urbanisation trends.

The UTI Asset Management Company will compete against its likes — Nippon Life India Asset Management and HDFC AMC on the stock exchanges.

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CompanyStock change since March 31
Nippon Life India Asset Management6%
HDFC AMC8%

Widespread customer reach and diverse portfolio

The brand is widely recognised across the country for its strength and more than 55 years of heritage as a leading and pioneering, a participant in the mutual fund industry. The company also offers a diverse portfolio of domestic funds, including equity, hybrid, income, liquid and money market funds, as well as portfolio management services, retirement solutions, and offshore and alternative investment funds, which serves as its strength, according to ICICI Direct Research.

Client wise distribution of AUM as on June 2020
ClientsLive FoliosClosing AUM% of Domestic Mutual Fund Closing AUM
Individual investors (other than NR Is)109 lakh₹ 62910 crore43.80%
Corporate and other institutional investors1 lakh₹65110 crore45.40%
Banks and other financial institutions0₹4960 crore3.50%
Trusts0₹8140 crore5.70%
NRIs1 lakh₹2430 crore1.70%
Total111 lakh₹143550 crore100%
Source: ICICI Direct Report

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Key concerns highlighted by brokers

The IPO pricing

At the upper price band of ₹554 per share, the company is being valued at ₹7000 crore and according to Nirmal Bang, the IPO pricing is undemanding given the valuation HDFC AMC and Nippon AMC are currently commanding.

“From a more near-to-medium term perspective, we currently have a cautious view on the overall AMC sector. Even though we are positive on the industry prospects from a long-term perspective, we take cognizance of some of the near-to-medium term headwinds,” the Nirmal Bang report said.
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The growing uncertainty in the market

Investment performance is one of the important factors for retaining existing customers and attracting new ones and, therefore, for maintaining and growing the company's AUM. The performance of UTI funds depends not only on its investment strategies but also on a number of factors including market, economic and other conditions. Poor investment performance could have a negative effect on business and growth as it could lead to loss of clients, ability to attract funds and negative investment performance will directly impact income from management fees, ICICI Direct report said.

A huge reliance on big clients

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As of June 30, 2020, UTI AMCs top six active equity funds constituted 75.3% of total Quarterly Average Assets Under Management (QAAUM) of active equity funds while top five passive equity funds constituted 98.7% of total QAAUM of passive equity funds. UTI AMC has only four liquid and money market funds. And, according to brokerages, underperformance by any of these funds may have a disproportionate adverse impact on AUM and thereby income.

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