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Result Highlights

* Revenue: Revenue from operations at Rs 2,695mn was down -5%/-8.6% QoQ/YoY lagging the de-growth/growth of MF QAAUM at -0.9%/6.7% QoQ/YoY
* Share of Equity in AUM: Share of Equity in AUM at 30% was down -105 bps QoQ and -143 bps YoY
* Share of B-30 in AUM: Share of B-30 at 22% was down -100 bps QoQ and -100bps YoY
* Channel mix: Share of Banks+ND, MFD and Direct channel was 9%, 25% and 66%, respectively in overall AUM
* Operating profit margin: Calculated operating profit margin for the quarter, at 33.7%, was down -952 bps QoQ and -511 bps YoY

Our view – Equity yield erosion drags overall yield lower

Overall revenue yield has declined marginally by about 0.5 bps QoQ due to a decline of about 2 bps in equity segment yield: The decline in equity segment yield is mainly because the older and higher yielding equity assets are being churned out and newer money is coming in at lower yield. The equity yield has declined about 7-8 bps from FY22 to FY23. Management stated that, leaving aside the impact from replacement of old AUM, overall yield would still decline going forward due to increasing share of passive funds.

The fact that growth stocks have not been doing well has affected equity schemes’ return for UTI: However, UTI has enough number of strategies in place to tide over this issue. 3-4 core strategies in the equity segment delivering returns would be enough to improve sales traction. UTI is approaching distribution partners with their new products.

We maintain ‘BUY’ rating on UTI with a revised price target of Rs 825: We value UTI at 17.4x FY24 P/E at which it would trade at a FY24 P/B of 2.7x.

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