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Improved equity fund performance augurs well

Our view – Overall revenue yield remaining stable is also creditable

Revenue Yield - Calculated revenue yield was stable on sequential basis as slight improvement in asset mix offset the slight deterioration in equity yield: The share of equity QAAUM and Hybrid QAAUM was up by 28bps and 4bps respectively. The stock yield for the Equity and Hybrid segment was 75 bps, lower by ~1 bps sequentially. The company has not yet carried out any rationalisation of commission structure for the mutual fund stock AUM but may take a call in 4Q or 1Q.

Equity business – Equity fund performance rankings have improved over the past 6 months, which augurs well: 11 out of the company's 18 equity mutual funds are now ranked in quartiles 1 and 2 compared with 6 funds as of March. The company is using hybrid funds as its go-to-market strategy and has done well, mobilising more than Rs 25bn. For Equity and Hybrid funds combined, the company had fresh inflows of Rs 60- 70bn in 1H. Management opined that good flows should be witnessed over 2H.

We maintain an ‘ADD’ rating on UTI with a revised price target of Rs 1350: We value UTI at 22x FY26 P/E at which it would trade at a FY26 P/B of 3.6x.

(See Comprehensive con call takeaways on page 2 for significant incremental colour.)

Other Highlights (See “Our View” above for elaboration and insight)

* Revenue: Revenue from operations at Rs 3,730mn was up 10.7%/27.9% QoQ/YoY leading/lagging the growth of MF QAAUM at 10.3%/28.4% QoQ/YoY

* Share of Equity in AUM: Share of Equity in AUM at 28.8% was up 28bps QoQ but down -55bps YoY

* Share of B-30 in AUM: Share of B-30 at 21% was flat QoQ but down by -200 bps YoY

* Channel mix: Share of Banks + Distributors, MFD and Direct channel was 7%, 23% and 69%, respectively in overall AUM

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