Analysts believe that the response gathered by the UTI AMC IPO could have resulted from the concern about recent outflow of Assets Under Management.
UTI Asset Management Company shares made their stock market debut at Rs 490.25 per share, a discount of Rs 63 or 11.5% from the issue price of Rs 554 per share. In the minutes after opening the stocks were seen trading at Rs 503 apiece, up 2.77% from the listing price but still trading lower than the issue price. The second largest AMC in India saw its initial public offering (IPO) get oversubscribed by investors. Retail investors had bid for their portion of the issue 2.32 times while Qualified Institutional Buyers (QIB) subscribed their portion 3.34 times. Non-Institutional investors had undersubscribed their portion, bidding for only 93% of their portion. UTI AMC has a market capitalization of Rs 6,215 crore on listing.
The second largest AMC’s Rs 2,160 crore IPO did not include a fresh issue but only an offer for sale (OFS) from existing shareholders. The selling shareholders include State Bank of India, Life Insurance Corporation, Bank of Baroda, Punjab National Bank, and T Rowe Price. However, none of the shareholders selling their stake are exiting the company completely but have only sold a part of their stake in the company. With no fresh issue, UTI AMC has not generated revenue from the IPO.
Analysts believe that the response gathered by the UTI AMC IPO could have resulted from the concern about recent outflow of Assets Under Management. “However, UTI AMC has the potential to regain its market share and increase return ratio,” said Jaikishan Parmar- Sr. Equity Research Analyst, Angel Broking. “ UTI AMC has a well-diversified and strong presence in b 30 cities, where SEBI has allowed to charge additional 30 bps and these inflows are sticky. The company has penetrated well into the B30 cities as its 250+ development officers and Chief Agents are based in B30 cities,” Parmar added.
The mutual fund industry in India still has significant potential and a wide area to cover, giving UTI AMC plenty of opportunities. Mutual funds industry has grown 13.5% from March 2010 to March 2020. “ At a price band of Rs 552-554, UTI AMC has priced its IPO at ~4.6% of total FY20 AUM (~26x P/FY20 earnings) with ~10% FY20 RoE,” said brokerage and research firm Emkay Global in a recent note, while terming the valuations as attractive and justified.
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