UTI AMC gains 3%, trades above issue price for the first time since listing

JM Financials Institutional Securities recently initiated coverage on UTI AMC with a 'BUY' rating and a target price of Rs 700

Shares of UTI Assets Management Company (AMC) were trading higher for the third straight day, up 3 per cent at a fresh record high of Rs 560.95 on the BSE on Wednesday. The stock is trading above its issue price of Rs 554 for the first time since listing on October 12, 2020.

UTI AMC is the second-largest asset management company in India in terms of total assets under management or AUM (Rs 10.4 trillion) and the 8th largest asset management company in India in terms of mutual fund monthly average AUM (MAAUM of Rs 1.57 trillion).

In the past three days, shares of UTI AMC gained 14 per cent, after JM Financials Institutional Securities initiated coverage on the stock with a 'BUY' rating and target price of Rs 700.

Analysts at the brokerage firm believe UTI AMC’s strong brand recognition and retail presence, continued improvement in equity fund performance and expected improvement in profitability driven by costs moderation makes it one of the preferred plays to capitalise on the financial savings opportunity in the country.

UTI AMC’s AUM bounced back to Rs 1.5trn+ by Sep’20 leaving behind the hiccups faced in FY19-20 (due to defaults by some large corporates and market correction due to Covid-19 fears). Further, we see AUM growth momentum increasing going forward aided by improving equity fund performance and healthy performance on the ‘sticky retail’ equity inflows (SIP) front; SIP market share increased to 3.2 per cent in July-September quarter (2QFY21), it said.

UTI AMC’s core operating profitability historically was closer to that of Nippon Life India Asset Management or NAM’s (except FY20). As it reverts to trend profitability, analysts expect valuations to rerate upwards (trading at 56 per cent discount to NAM) in the near-to-medium term, aided by robust AUM growth driven by superior equity fund performance and improvement in operating profitability driven by cost moderation, it said.

Shares of UTI AMC had made a tepid debut at the bourses with the stock listing at Rs 490.25 on the BSE, an 11.5 per cent discount to the issue price of Rs 554.

At 10:20 am, the stock was trading 1.3 per cent higher at Rs 553.50 on the BSE, against 0.22 per cent rise in the S&P BSE Sensex. The trading volumes on the counter more-than-doubled with a combined 671,000 shares changing hands on the NSE and BSE.