 "UTI AMC stock hits new high in weak market on healthy Q2; up 66% since Apr")
Shares of UTI Asset Management Company (AMC) hit a record high of Rs 1,349.60, rallied 12 per cent on the BSE in Wednesday’s intra-day trade, in an otherwise weak market. The buying at the counter was attributed to gain in market share along with improving operating efficiency & favourable risk-reward ratio.
The stock surpassed its previous high of Rs 1,342 touched on October 16, 2024. At 03:00 PM; it was trading 8 per cent higher at Rs 1,295, as compared to 0.54 per cent decline in the BSE Sensex. Since April, thus far in the financial year 2025, UTI AMC has appreciated by 66 per cent.
In the past three days, the stock has surged 18 per cent after the company reported a 31 per cent year-on-year (YoY) jump in profit after tax (PAT) at Rs 239 crore for the second quarter ended September 2024 (Q2FY25), led by steady revenue yield and moderation in the expense ratio to ~25bp. The one-off tax outgo was also lower-than-expected, which led to PAT outperformance. The company's revenue from operations rose 33 per cent to Rs 538 crore in Q2FY25, from Rs 404 crore in Q2FY24.
Management has been trying to moderate the operating expenses, which was visible during the quarter, but sustainability of the same is a key monitorable, according to analysts.
Total Group asset under management (AUM) grew 19.36 per cent YoY and 4.5 per cent quarter-on-quarter (QoQ) to Rs 20.16 trillion. The UTI mutual fund quarterly average AUM accounted for Rs 3.43 trillion reflecting a growth of 28 per cent from Rs 2.67 trillion crore a year ago and Rs 3.11 trillion crore as of June 30, 2024. This significant increase can be largely attributed to our focused go-to-market strategy that aggressively promoted all categories of funds.
The Indian mutual fund industry has witnessed remarkable growth in recent times, much of which can be attributed to the retail investors. The aggregate folio count as of September 2024 is 210.5 million as against 157.1 million a year ago, indicating an increase of 34 per cent on YoY basis.
The growth can be credited to various factors including investor confidence, financial literacy initiatives and enhanced awareness especially in the cities beyond top 30, and a noticeable shift from traditional savings to new investment avenues. It is pertinent here to mention that mutual fund industry is playing a very significant role in India's economic growth, UTI AMC said in Q2 earnings conference call.
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The company reported market share gains in hybrid & ETF products on a QoQ basis, despite the consistent overall losses in other products including equity funds.
Analysts at InCred Equities maintain ADD rating on the stock with a higher target price of Rs 1,450 (Rs 1,200 earlier), corresponding to ~15.3x FY26F EPS. The brokerage firm said it likes UTI AMC considering its improving scheme performance leading to steady inflow and healthy AUM, rationalization of operating expenses to strengthen operating performance and a favourable risk reward ratio. Key downside risks are lower growth and weak yields impacting profitability, it added.
Post-IPO, T Rowe Price International (a global investment management firm) is the largest shareholder with 23 per cent stake in UTI AMC. T Rowe Price also owns a major stake in UTI Trustee Company. With the rising importance of financial savings among Indian households, along with under-penetration and concentrated business model of mutual funds, the outlook for AMCs in India remains buoyant. Considering the improving efficiency of UTI AMC, T Rowe Price (already being an investment manager) could opt to buy a majority stake from public sector banks (the easiest route) and can become the promoter, the brokerage firm said in the result update.