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Our view – Revenue yield was stable while operating margin improved

Revenue Yield - Calculated revenue yield was stable even after unfavorable product mix change: The share on equity QAAUM and Hybrid QAAUM in total QAAUM was down sequentially by -63bps and -11bps respectively. On the other hand, the share of ETF & Index fund QAAUM in total QAAUM was up by 126bps sequentially. The revenue yield of Equity and Hybrid funds is much higher than ETF & Index fund’s yield. However, even after the unfavorable product mix change the calculated revenue yield for the quarter has remain stable sequentially

Operating Expense and Margin – Higher operating efficiency leads to better operating margin: The Equity QAAUM has grown by 4.5% QoQ and Hybrid QAAUM has grown by 5.4% QoQ. Even after sequential business growth in key fund segments the employee cost in 1QFY25 was down by -2.5% QoQ and other operating expense was down by - 9.4% QoQ. The total opex in 1Q was down -5.1% QoQ. This has led to an improvement in operating margin which came in at 47.1% in 1Q up by 617bps QoQ and 653bps YoY.

We maintain an ‘ADD’ rating on UTI with an unchanged price target of Rs 1225: We value UTI at 19x FY26 P/E at which it would trade at a FY26 P/B of 3.2x.

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

*  Revenue: Revenue from operations at Rs 3,368mn was up 6.0%/19.1% QoQ/YoY lagging the growth of MF QAAUM at 6.8%/25.2% QoQ/YoY

* Share of Equity in AUM: Share of Equity in AUM at 28.5% was down -63bps QoQ and -83bps YoY

* Share of B-30 in AUM: Share of B-30 at 21% was flat QoQ but down by -100 bps YoY

* Channel mix: Share of Banks + Distributors, MFD and Direct channel was 8%, 23% and 69%, respectively in overall AUM

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