Date: 29th Sep, 2020

Should you subscribe to the UTI AMC IPO?

IPO Season is on. Investors are going frenzy as many IPOs are getting record subscription. UTI
AMC IPO is opening today. Investors are eager to know whether they should buy this IPO or not.
MoneyGain is coming up with an in-depth analysis of the same.

These facts will provide you some light:

Positives:

1. Mutual fund industry is a growing industry and is expected to continue to grow.

2. UTI is going to be the only third company in listing space.
3. The IPO is coming at a cheap valuation as compared to its peers – HDFC & Nippon.

Negatives:

1. Market share of UTI is consistently dropping. It has declined to 5.4% as of Jun-20 from 8.2%
as of Mar-14.
2. AUM has dropped by 15.4% to Rs 1.36 trillion as of Jun-20 from Rs 1.58 trillion as of Jun-19.
3. Consistent decline in management fee: Rs 7.9 billion, Rs 8.8 billion and Rs 9.4 billion in
FY20, FY19 and FY18 respectively.
4. Net profit is in a downtrend: Rs 2.7 billion, Rs 3.5 billion & Rs 4 billion in FY20, FY19 &
FY18 respectively.
5. To add to the woes, the majority of schemes of the AMC are not performing well.
Underperformance will make it hard to bring fresh investments and can lead to
redemptions as well.
6. UTI does not have its own banking channel to promote the sale of its products.
7. AMC has the lowest ROE of just 10%.

We at the MoneyGain don’t see much juice in the IPO as UTI AMC is consistently underperforming
than its peers. Even though it is at a low PE valuation of 26 compared to its peers, we don’t
recommend it. For listing gains, we advise to just wait and check the response and subscription
before applying.