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Better equity performance key to re-rating

UTIAM saw a weak quarter as core PAT missed PLE by 11.5% due to

(1) lower revenue on account of mix change towards ETF

(2) Higher opex driven by other opex. Management guided that post VRS, quarterly staff cost could range INR 1.25–1.30bn while other opex could grow by 10% primarily led by tech spends and geographic expansion. UTIAM indicated its intention to pass on 5 bps TER impact to intermediaries. We increase opex for FY27/28E by 5.3%/7.9% while cut core PAT by avg. 10.5%. We keep multiple of 13x on Mar’28 core EPS but cut TP to INR 975 from INR 1,125 due to earnings cut. Change rating to ‘HOLD’ from ‘BUY.

Soft quarter due to lower revenue/higher other opex:

Overall and equity QAAuM was largely in-line at INR 3,921/1,302bn which de-grew QoQ by 1%/4%. Revenue was a 2.3% miss at INR 3.75bn led by lower revenue yields at 38bps (PLe 39.5bps). Opex was a tad higher at INR 2.44bn (PLe INR 2.36bn) due to other opex. Employee cost was largely inline at INR 1.32bn (PLe INR 1.35bn). Other expenses were higher at INR 944mn (PLe INR 835mn) likely due to IT spends. Hence, core income was lower INR 1.3bn (PLe INR 1.48mn); operating yields were at 13.4bps (PLe 15.2bps). Other income was negative INR 1.48bn due to MTM loss. Core PAT was INR 1.02bn (PLe INR 1.15bn). Net loss was INR 514mn.

Revenue yield was lower to estimates:

Equity share (incl. bal) fell to 33.2% (34.2% in Q3’26) while that of ETF increased to 34.1% from 33.2%. Net MF yields declined by 1.4bps QoQ to 30.5bps due to mix change from equity towards ETF as equity markets saw a steep correction in Mar’26. Company indicated its intention to pass on the 5 bps TER impact to intermediaries. While UTIAMC has been losing market share in active equity due to weak performance, it aims to scale this segment through a higher share of SIP investors, while also focusing on cross-selling and up-selling opportunities via salesforce marketing automation.

Opex was a miss; our estimates rise:

Management guided for a quarterly employee cost run rate of INR 1.25–1.30bn, driven by capacity expansion across all three business lines. Other opex increased by ~15% YoY largely due to investments in IT (cloud infrastructure) and physical expansion. Company expects ~10% increase in other opex, primarily led by tech spends and geographic expansion in the pension fund business. We increase opex for FY27/28E by 5.3%/7.9%

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