UTI AMC surges 8% after PPFAS MF buys 1.1 million shares via block deal

Shares of UTI Asset Management Company (AMC) surged 8 per cent to Rs 687.30 on the National Stock Exchange (NSE) in Tuesday’s intra-day trade after PPFAS Mutual Fund on Monday bought over 1 million shares in the company via block deal.

PPFAS Mutual Fund purchased 1.12 million equity shares representing 0.88 per cent stake in UTI AMC for Rs 71.40 crore. The mutual fund bought shares at price of Rs 636 per share on the NSE, the exchange bulk deal data shows. The names of the sellers were not ascertained immediately.

UTI AMC is promoted by four PSU sponsors, who collectively own 45.16 per cent. Bank of Baroda, State Bank of India and Life Insurance Corporation of India hold 9.98 per cent each, while PNB holds 15.22 per cent stake. US-based T. Rowe Price International holds another 22.97 per cent stake, the shareholding pattern data shows.

However, in past three months, the stock price of UTI AMC has underperformed the market, by falling 21 per cent, as compared to 6 per cent rise in the S&P BSE Sensex.

It hit a record high of Rs 1,217 on August 31, 2021 and a low of Rs 471.10 on October 12, 2020. UTI AMC made its stock market debut on October 12, 2020. The company had raised Rs 2,160 crore by issuing shares at price of Rs 554 per share.

Meanwhile, in October-December quarter (Q3FY23), UTI AMC reported a weak quarter across fronts, with 3 per cent sequentially lower core operating profits, owing to sharp compression in equity yields (-5.6bps QoQ), coupled with elevated staff costs (17.7bps of MF QAAUM), loss in equity market share (-18bps QoQ) and MTM losses on treasury book. Amongst top AMCs, UTI AMC holds the maximum levers to improve core profitability; however, near-term execution has been disappointing and poses a tall ask.

"We flag sustained medium-term pressure on core yields and staff costs, and consequently cut our earnings estimates for FY23E/24E/25E by 12%/3%/3% to factor in lower equity yields and treasury income. We expect UTIAM to deliver 7%/11% revenue/operating profit CAGR over FY22-25E on the back of healthy AUM growth and marginal cost rationalization,” analysts at HDFC Securities said in Q3 result update. Given its attractive valuation, the brokerage firm maintains BUY, with a lower target price of Rs 950 (19.5x Sep-24E NOPLAT + Sep-23E cash and investments).