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The lot size in UTI AMC UPO is 27
The lot size in UTI AMC UPO is 27

UTI AMC IPO opens for subscription: Key things to know before you invest

  • For retail investors, the minimum investment amount is 14,958 at the upper price band and they can apply for a maximum 13 lots
  • UTI AMC IPO closes on October 1

UTI AMC's IPO opened for subscription today and the mutual fund house is offering shares in the price band of 552-554 per share. The 2,160 crore IPO closes on October 1. UTI AMC will be the third asset management company to get listed on the stock exchanges after Nippon Life India Asset Management and HDFC AMC. The IPO of UTI AMC comprises sale of 3,89,87,081 equity shares or 30.75% by existing shareholders, including SBI, LIC, Bank of Baroda and T Rowe Price International. As of 2:15 am today, the issue was 44% subscribed.

At present, SBI, LIC, Punjab National Bank and Bank of Baroda hold 18.24% stake each in UTI AMC. The US-based T Rowe Price owns 26% stake in the company.

Lot size and probable listing date

Lot size of the UTI AMC IPO has been fixed at 27 equity shares. Investors have to apply minimum of 27 shares and in multiples thereof. Brokerages expect the share allocation in UTI AMC to be finalised on October 7 and listing may happen on October 12.

For retail investors, the minimum investment amount is 14,958 at the upper price band and they can apply for a maximum 13 lots. KFintech Private Limited is the registrar of the AMC IPO.

Kotak Mahindra Capital, Axis Capital, Citigroup Global Markets India Pvt Ltd, ICICI Securities, JM Financial and SBI Capital Markets are the book running lead managers to the offer. The shares of the company are proposed to be listed on BSE and NSE.

UTI AMC manages the domestic mutual funds of UTI mutual fund, provides Portfolio Management Services (PMS) to institutional clients and high networth individuals (HNIs) and manages retirement funds like National Pension Scheme (NPS). The AMC also manages offshore funds and alternative investment funds. UTI AMC provides PMS to Employees Provident Fund Organization (EPFO).

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 domestic mutual fund QAAUM as of June 30, 2020. Domestic mutual fund QAAUM managed was 1,33,630 crore, while other AUM was 8,49,390 crore (of which PMS represented 6,97,050 crore).

UTI AMC Vs Nippon AMC vs HDFC AMC
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UTI AMC Vs Nippon AMC vs HDFC AMC

UTI AMC had reported total income of 891 crore in FY20 with net profit of 276.5 crore.

Mazagon Dock Shipbuilders has also come out with an IPO which will close on October 1.

Risk Factors

"Our thesis on UTI AMC assumes continued popularity of mutual funds which in turn would benefit the AMC due to its strong distribution reach and brand image. Any adverse impact on inflows, both for equity and debt funds, may impact overall revenues and profitability of the company," domestic brokerage Emkay says.

What analysts say

Though UTI AMC has a lower ROE as compared to its peers like HDFC AMC and Nippon AMC, many brokerages have recommended a "subscribe" citing attractive valuations.

UTI AMC's FY20 ROE stands at 10.3% which is much lower than its peers (HDFC AMC-35.5% and Nippon Life-16.2%, says Geojit Financial Services.

"However, at the upper price band of Rs.554, UTI AMC is available at P/E of 25x FY20, which is cheaper compared to its peers (HDFC AMC-36x, Nippon Life - 38x). Based on the upper price band, the market cap to MF AUM for UTI stands at 5.3% compared to HDFC AMC-12.6% and Nippon Life- 8.6%. Additionally, they have huge business of PMS & NPS, which accounted for 41% of Q1FY21 revenue. We believe that the IPO price is after factoring lower ROE, high competition and uncertainities from pandemic. Accordingly, we recommend subscribe rating on a short to medium-term basis, expecting listing gain," Geojit said.

"At higher price band of 554, the stock is valued at 25.7 times FY20 earnings. Peers like HDFC AMC and Nippon AMC which are trading at 35.2(times) and 35.0(times)FY20 earnings respectively due to higher ROE. We still believe that UTI AMC is lucrative and we recommend to subscribe, says LKP Securities.

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