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Business overview

UTI AMC is the 8th largest AMC in India in terms of total QAAuM (Rs2245bn as at Q3FY22). It has 167 branches of which 108 are situated in B-30 cities. Distribution network includes 61,000+ MFDs. Equity distribution mix is – direct at 34%, MFDs is 55% and BND share is 11% (up from 9% as at Mar’21). Total headcount as at Dec’21 stood at 1393

Investment rationale

* Basis QAAUM, equity grew strongly by 11.0% QoQ while its share enhanced by 1.3% QoQ to 40%. Market share (MS) basis QAAuM further enhanced QoQ to 5.88% from 5.77% while equity MS rose QoQ from 4.87% to 4.95%

* Market share in SIP flows once again rose (increasing since the last 7 quarters) and it improved to 4.1% (QoQ 4.0% & YoY 3.5%). SIP inflows for the quarter grew by 13% QoQ and 65% YoY while no. of SIP accounts saw a strong accretion of 65% YoY. SIP AUM as at Q3FY22 stood at ~Rs181bn.

* While Q3FY22 saw a pressure on equity yields due to gross flows coming in at lower yields with redemption being higher. Some schemes also merged attracting lower yields. Outlook for yields is better which may mean revert in the next quarter. With flows being strong in equity, UTI could continue to gain market share being a good inflation hedge.

Key triggers in the near to medium term

* Enhancement in yields in the next quarter could trigger an upmove.

* Further improvement in overall market share in the near term could lead to a positive movement in the stock

Key risks

* Equity performance not sustaining in the near to medium term

* Weaker flows also impacting equity/debt AuM growth

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