UTI Asset Management Co Ltd (BOM:543238) Q2 FY25 Earnings Call Highlights: Robust AUM Growth ...

GuruFocus News

Mon, Oct 28, 2024, 5:00 AM 4 min read

Total Asset Under Management (AUM): INR20.16 lakh crores as of September 30, 2024, up from INR16.89 lakh crores a year ago.
Quarterly Average AUM for UTI Mutual Funds: INR3.43 lakh crores, a growth of 28% from INR2.67 lakh crores a year ago.
Equity Quarterly Average AUM: INR98,638 crores, up by approximately 26% year-on-year.
Quarterly Average AUM for Index and ETF: INR1,45,135 crores, up by 47% year-on-year.
ETFs and Index Fund Net Inflows: INR6,022 crores in Q2 FY25.
SIP AUM: INR39,882 crores as of September 2024, a growth of 50.26% year-on-year.
SIP Inflows for Q2 FY25: INR2,058 crores.
Consolidated Net Profit for Q2 FY25: INR239 crores, up by 31% year-on-year.
Consolidated Core Revenue from Operations for Q2 FY25: INR373 crores, up by 28% year-on-year.
Stand-alone PAT for Q2 FY25: INR201 crores, up by 50% year-on-year.
UTI Pension Fund AUM: INR3.36 lakh crores as of September 30, 2024, up by 24.64% year-on-year.
UTI International AUM: INR29,814 crores as of September 30, 2024, up by 23.16% year-on-year.
UTI Alternatives AUM: INR2,856 crores.

Warning! GuruFocus has detected 3 Warning Sign with BOM:543238.

Release Date: October 26, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

UTI Asset Management Co Ltd (BOM:543238) reported a significant increase in total assets under management, reaching INR 20.16 lakh crores as of September 30, 2024, up from INR 16.89 lakh crores in the previous year.
The company launched new products, including the UTI Nifty 200 Quality 30 Index Fund and the UTI Nifty Private Bank Index Fund, which have performed well in their respective categories.
UTI AMC's SIP AUM witnessed a growth of 50.26% year-on-year, reaching INR 39,882 crores as of September 2024.
The company posted a consolidated net profit of INR 239 crores for the second quarter, marking a 31% increase year-on-year.
UTI AMC has been expanding its geographical presence, with new offices opened in New York and Paris, and plans to hire more professionals in key geographies to accelerate business development.

Negative Points

Despite the growth in assets under management, UTI AMC experienced a minor decline in market share this quarter.
The company faced higher employee and administrative costs due to expansion efforts, impacting short-term profitability.
There was a rationalization of branches, with some closures due to insufficient AUM to justify their operation.
The company incurred an additional deferred tax liability of INR 12.10 crores due to changes in capital gains tax rates, affecting net profit.
UTI AMC's equity and hybrid funds have seen outflows, and the company is working to improve fund performance and market share in these segments.

Q & A Highlights

Q: Can you quantify the ESOP expense for the first half for the stand-alone and consolidated business? Also, have you made any changes to the renewal payout structures for incremental flows? A: The ESOP expenses were around INR3.5 crores for the half year, expected to be INR5 crores for the full year. We haven't rationalized commission expenses on the stock AUM. For fresh inflows, we follow a marginal expense ratio policy, sharing incremental inflow between us and the AMC. The gross fee for the pension fund is around 3 basis points, with 50% paid back to PFRDA, resulting in a net fee of 1.5 basis points.

Q: Could you provide segment-wise revenue yields and comment on recent outflows in core equity schemes? A: Equity and hybrid funds yield around 75 basis points, ETFs and Index funds yield 6-7 basis points, cash and arbitrage funds yield 10 basis points, and income funds yield 20-21 basis points. Our equity funds have shown improvement, with 11 out of 18 funds now in quartile one and two. We are focusing on hybrid funds, which have seen significant inflows.

Q: Why have the number of branches and employees reduced over the last few quarters? A: We have increased branches by 24, despite closing five due to AUM not justifying their presence. Employee numbers have decreased due to natural retirements. We have recruited management trainees to fill leadership positions, so no new additions are planned currently.

Q: What is the outlook for employee expenses and yields, given the increase in direct TERs? A: Employee costs are expected to rise by 2-3% on a stand-alone basis and 4% on a consolidated level. The direct plan yield has increased by 3-4 basis points, but fresh inflows with lower yields have balanced this, maintaining overall yields at 75 basis points.

Q: How do you see the mix between mutual funds and other businesses evolving over the next few years? A: We are expanding our capabilities in alternatives and international businesses, which should improve yields. The pension fund is expected to grow significantly due to government initiatives. We anticipate the alternatives business to become core PAT positive from the next financial year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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