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Overall yield stagnant despite equity yield rising

Result Highlights

? Revenue: Revenue from operations at Rs 2,836mn was down/up -2.5%/0.6% QoQ/YoY lagging the growth of MF QAAUM at 3.1%/7.2% QoQ/YoY ? Share of Equity in AUM: Share of Equity in AUM at 31% was down -13 bps QoQ and -62 bps YoY ? Share of B-30 in AUM: Share of B-30 at 23% was up 20 bps QoQ but down -100bps YoY ? Channel mix: Share of Banks+ND, MFD and Direct channel was 9%, 26% and 65%, respectively in overall AUM ? Operating profit margin: Calculated operating profit margin for the quarter, at 43.2%, was down -7 bps QoQ and -407 bps YoY

Our view – Overall yield stagnant despite equity yield rising

Overall revenue yield stays stagnant sequentially despite equity yield inching up: The yield in the equity business inched up 1 bp QoQ for UTI. Despite that, overall revenue yield remained stagnant at 37 bps on sequential basis. This is mainly on account of category mix change and the only category to see a sequential rise in share of AUM was the ETF and Index fund business, whose share rose 285 bps QoQ and 702 bps YoY to 37% of total AUM. Management stated that the rise in the share of ETFs will remain a factor exerting some downward pressure on yield

Income funds (non-liquid debt funds) show a precipitous decline of -35% YoY but have eked out a 2.6% rise QoQ: Management is optimistic about fresh inflows into the debt segment once the policy rate peaks out. The company expects the key policy rate to peak at 6.5% and, once that happens, debt funds would become attractive again to investors. Medium duration funds of 1-4 year horizon would be of particular interest to investors

We maintain ‘BUY’ rating on UTI with a revised price target of Rs 900: We value UTI at 18.5x FY24 P/E

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