September 28, 2020

UTI ASSET MANAGEMENT COMPANY LTD IPO – ALL YOU WANT TO KNOW

By Roy

Along with Mazagon Dock, another IPO of UTI AMC is hitting the bourses. I am highlighting all the necessary points an investor needs to know regarding this UTI AMC issue. Should you subscribe or give it a miss? Do read on.

Issue Snapshot

UTI Asset Management Company Limited
Issue PeriodBid/Offer Opens On: Tuesday, 29th September, 2020*
Bid/Offer Closes On:  Thursday, 1st October, 2020
*The Anchor Investor Bidding Date shall be 28th September, 2020
Issue DetailsOffer for Sale of upto 38,987,081 Equity Shares
Issue Size (₹ Cr)₹ 2,152 Cr - ₹ 2,160 Cr
Price Band₹ 552 - 554
Bid Lot27 Shares and in multiple thereof
Employee Reservation2,00,000 Equity Shares of Face Value ₹ 10
Issue Structure :
QIB50% of the net offer ( 1,93,93,540# Equity Shares ) (₹ 1,071~Cr - ₹ 1,074^ Cr)
NIB15% of the net offer ( 58,18,062# Equity Shares ) (₹ 321~Cr - ₹ 322^ Cr)
Retail35% of the net offer ( 1,35,75,479# Equity Shares ) (₹ 749~Cr - ₹ 752^ Cr)
# Number of Equity Shares as per mentioned in RHP
~ Lower price band and ^ Upper Price Band
BRLMsAxis Capital, Kotak Mahindra Cap, Citigroup Global, DSP ML, ICICI Sec, JM Financial,
SBI Capital Markets
RegistrarKFin Technologies Pvt. Ltd.

Time Table

  • Finalization of the basis of Allotment – 07-10-2020
  • Refunds/Unblocking ASBA – 08-10-2020
  • Credit of Equity Shares to Demat – 09-10-2020
  • Listing on BSE and NSE – 12-10-2020

Pre and Post Issue Share-holding Structure

Offer of sale upto 3,89,87,081 equity shares
Offer of Sale Breakup
Pre OfferPost Offer
PromotersNo of Equity Shares% of Equity Share CapitalOffer For SaleNo of Equity Shares% of Equity Share Capital
State Bank of India2312500026.00%10459949126650519.99%
LIC2312500018.24%10459949126650519.99%
Bank of Baroda2312500018.24%10459949126650519.99%
Punjab National Bank2312500018.24%38036171932138315.24%
T Rowe Price International3296468618.24%38036172916106923.00%
TOTAL12546468698.96%389870818647760568.21%
The offer shall constitute 30.75% of fully diluted post offer equity share capital

Financials Snapshot

Market Competition

GMP of UTI AMC and other Key Points

  • If I had to write one headline for UTI AMC IPO, it will be ” A fallen giant”. There was a time when Mutual Fund and UTI were synonymous. But with the advent of Private and Global AMCs, UTI has lost its shine.
  • UTI AMC established the first mutual fund in India and has been in the asset management industry for more than 55 years with a strong history and proven track record in mutual fund mutual industry with strong brand recognition.
  • They have SBI, LIC, BOB, PNB as their promoter. So, UTI receives funds from PSUs. Most PSUs invest in corporate debt funds every quarter for their cash management requirements.
  • UTI 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 (Quarterly Average AUM) as of June 30, 2020, according to CRISIL.
  • UTI has a presence in may lower-tier cities as they have a strong distribution network.
  • UTI AMC has 11 million live folios accounting for 12.8% of the client base managed by the Indian mutual fund industry.
  • The Sponsors’ shareholding in Equity Shares will be diluted after the Offer and they will own less than 51% of the outstanding shares, which may adversely affect their ability to gain and retain Government business.
  • Asset Management is a very good business for days to come when more and more people will try to have a bite at the financial markets. It has a capital-light model as we can see in the Balance sheet that the company does not have any debt. Fund Manager will get their payment as a percentage of incoming proceeds into the fund.
  • The management fees from domestic mutual funds account for 72.7% of the total income of the company.
  • AMC companies generally demand high PE due to high ROE and high ROCE. But PE is a subset of growth and I can hardly see any growth in the UTI AMC profitability. Profit and EPS is on a downward slope YoY. They have conceded the market share to private players.
  • The issue is cheaply priced as it provides the room for an upside rally. But in order to get the market valuation, UTI has to show growth, which is missing at the moment.
  • Grey Market Premium (GMP) of UTI AMC is around 5-10% which is very poor. Market punters are not upbeat with this IPO.
  • I am not expecting any listing gain in this IPO.
  • My view is, Skip UTI AMC IPO.
  • In AMC space, HDFC AMC is the best stock for investment.

Read the Mazagon Dock IPO analysis here . Mazagon Dock IPO is a Must Subscribe and 2X candidate on listing.

Source – RHP, JM Fin Research Report