UTI Asset Management Company – IPO

by Manshu on January 17, 2008

in IPO/NFO

Business of UTI Asset Management Company
 

UTI Asset Management Company provides asset management services through mutual funds, portfolio management services, and managing venture capital and private equity funds. The total assets under management as on 30th September were Rs. 495,418 million and is the second largest mutual fund provider in India. The company’s assets under management have been growing at a 28.6% CAGR from Rs. 138,967 million as of Jan 31 2003 to Rs. 450,026 million as of September 30,2007. However in the same time frame the industry as a whole has been growing at a faster pace of 48.9% CAGR.
The EPS of the company has grown from Rs.5.81 in fiscal 2005 to Rs.13.71 in fiscal 2006 and reduced to Rs. 11.51 in fiscal 2007. Since there are no listed AMCs right now there is no comparison available to determine what could be a reasonable P/E ratio for this company.
 

Risks faced by UTI Asset Management Company
 

About 23.3% of the revenues of UTI Asset Management Company last fiscal were derived from SUUTI and in the coming years this is expected to go down in the coming years. The contract itself will expire on January 31 2008, post which it may not be renewed.
UTI Asset Management Company has proposed the termination of its Senior Citizen Unit Plan 1993 which had around 125,000 investors and this step has caused negative publicity and may also lead to legal action which may affect the company adversely. The plan had to be terminated because it became financially unviable.
 

Summary
 

The savings rate in the country has always been as a percentage of GDP and the RBI has estimated this to be 22.1% of GDP between fiscal years 2000 and 2006 however less than half of this finds its way in fiscal assets with the rest going into physical assets like gold and property. While more and more people are expected to join the bandwagon of mutual fund investors this market is poised to grow and companies operating here should also benefit from the steady in flow of money from domestic investors.  The negative brand publicity that UTI has suffered in the past coupled with the lower than industry growth it has shown in the past does however show that within the sector this company may not be the best performer in the years ahead.
 

UTI Asset Management Company has proposed the termination of its Senior Citizen Unit Plan 1993 which had around 125,000 investors and this step has caused negative publicity and may also lead to legal action which may affect the company adversely. The plan had to be terminated because it became financially unviable.

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