Equity Research

Equity Research INDIA February 5, 2021 BSE Sensex: 50614 UTI Asset Management Company BUY ICICI Securities Limited is the author and distributor of this report Valuations trailing business recovery Rs563 UTI Asset Management Company’s (UTI AMC) predecessor Unit Trust of India (UTI) is a pioneer and one of the oldest brands in India’s mutual fund industry Initiating coverage with a heritage of >55 years. Currently, with a 5.6% share of total AUM in India in 9MFY21, it ranks eighth in the mutual fund industry. UTI AMC has lost equity AUM Financial Services market share from 8.7% in FY15 to 4.6% in 9MFY21 and its debt AUM market share from 7.7% to 4% in the same timeframe. This has resulted in its AAUM Target price Rs700 remaining stagnant at ~Rs1.5-1.6trn as at Dec’20, but overall revenue yield declining from 57bps in FY18 to 47bps in FY20. However, UTI AMC has chartered a business recovery on the basis of cost control and increased distribution tieups Shareholding pattern (which includes CitiBank, State Bank, ICICI Bank, HDFC Bank etc). We believe Sep Dec that this should help UTI to charter 7.4% EBITDA CAGR over FY20-23E with 13% '20 '20 Promoters 0.0 0.0 RoE. Institutional  Recommend BUY with a target price of Rs700 based on 25x core FY23E EPS investors 68.2 89.1 MFs and others 7.9 13.7 of Rs18 and add cash and investments of Rs255/share. UTI valuation discount Banks / FIs 35.2 35.3 to peers (currently trading at 26x FY20 EPS compared to 51/49 for HDFC Insurance 10.0 10.0 FIIs 15.1 30.1 AMC/Nippon AMC) is driven by history of market share loss and higher cost

Others 31.8 10.9 structure. While market share loss has been a common phenomenon for most Source: BSE AMCs, cost structure of UTI can improve with organic initiatives.  Cost-control initiatives can help improve profitability: Employee costs (20bps of AAUM) and other expenses (13bps of AAUM) remain high vis-à-vis peers like HDFC Price chart AMC and Nippon AMC. Management wants to control employee costs (Rs3.5bn 590 level per annum) aided by natural retirement of high-salaried personnel and also 570 retain other expenses at Rs2bn-2.25bn level over the next five years. Even an 550 industry median cost structure can lead to an incremental 5bps improvement to the 530 operating profit levels (Rs 2.6bn FY22E operating profit on an AUM base of

(Rs) 510 Rs2.15trn). 490  Leading presence in B30 markets, distribution initiatives can help improve 470 market share: With approximately 27% of its overall AUM in B30 geographies, UTI 450 has the highest concentration in that segment among the top-10 AMCs. In addition, UTI AMC is actively seeking strategic partnerships, including with banks, to help 4-Jan 1-Feb 9-Nov 7-Dec 12-Oct 26-Oct 18-Jan 23-Nov 21-Dec gain a better foothold in T30 markets as well as cement its position in B30 – thus helping it recoup the market share ceded over the past five years.  Expect earnings CAGR of 3-21% for over the next 10 years assuming +/- 300bps movement in equity market share. Assuming that: 1) Indian nominal GDP grows at 9% CAGR over the next 10 years, 2) aggregate net inflow p.a. is 1 % of aggregate GDP (vs 0.8% over 2010-20), and 3) average annual performance growth is 7.8% (vs 6% over 2010-20) - Indian AUM is likely to grow to Rs45trn by 2025 and Rs100trn by 2030. Within a possible +/-300bps change in equity market share, UTI AMC's Revenue / operating profit / PAT CAGR is likely to be 2-14% / 1- 24% / 3-21% over the next 10 years after adjusting for decline in yields from growth in AUM and periodic stepdown in allowable MF TER. Ma rket Cap Rs71.4bn/US$979mn Year to Mar FY20 FY21E FY22E FY23E Bloomberg UTIAM IN Revenue (Rs mn) 7,879 7,739 8,036 8,618 Shares Outstanding (mn) 126.8 EBITDA(Rs mn) 2,562 2,206 2,645 3,177 52-week Range (Rs) 581/476 Net Income (Rs mn) 2,715 5,137 3,599 4,031 Free Float (%) 100.0 Core PAT 1,892 1,519 1,854 2,266 Research Analysts: FII (%) 30.1 EPS (Rs) 21.4 40.5 28.4 31.8 Daily Volume (US$'000) NA P/E (x) 26.3 13.9 19.8 17.7 Ansuman Deb Absolute Return 3m (%) 16.8 Core EPS (Rs) 14.9 12.0 14.6 17.9 [email protected] +91 22 6637 7312 Absolute Return 12m (%) NA Core PE (Rs) 37.7 47.0 38.5 31.5 Ravin Kurwa Sensex Return 3m (%) 24.7 Dividend Yield 1.2% 3.1% 2.0% 2.7% [email protected] Sensex Return 12m (%) +91 22 2277 7653 25.6 RoE (%) 10.1 17.6 11.3 11.9

Please refer to important disclosures at the end of this report

UTI Asset Management Company, February 5, 2021 ICICI Securities

TABLE OF CONTENT

AUM deep dive analysis ...... 3 Performance has been the key driver for UTI’s AUM growth ...... 3 Equity AUM market share is stable now at ~5% ...... 4 Overall / Equity AAUM grew at 11% / 9% CAGRs in past 10 years ...... 5 Key funds managed and fund manager details ...... 7 SIP flows have been steady with market share of 10% ...... 8 High B30 AUM mix of 24%...... 9 Long-term operating profit CAGR can be 3-21% on the basis of +/- 300bps equity AUM market share ...... 10 Q3FY21 result review: Strong show ...... 12 Company background ...... 15 UTI Venture Funds ...... 15 UTI International ...... 16 UTI Retirement solutions (UTI RSL) ...... 16 UTI Capital Private Ltd ...... 17 India Infrastructure development fund ...... 17 Board of Directors ...... 18 Committee composition ...... 19 ESOP exercise price higher than current market capitalisation ...... 19 Dividend policy of at least 50% payout ...... 20 Cost comparison with peers ...... 21 UTI’s cost structure has room for improvement ...... 21 Improvement in cost structure to industry median levels can lead to incremental operating profit of 5bps of AUM ...... 24 UTI employee costs has headroom to improve from 20bps in FY20 to 11bps in FY2524 Detailed revenue breakup: 79% comes from India MF and 5% from UTI International ...... 25 Distribution is a focus area ...... 26 Fund performance tracker ...... 27 Financial summary ...... 31 Index of Tables and Charts ...... 33

Note: Sensex and Current Market Price are as on February 4, 2021.

UTI Asset Management Company, February 5, 2021 ICICI Securities

AUM deep dive analysis

Performance has been the key driver for UTI’s AUM growth

Chart 1: History of AUM creation UTI AMC 60% 17% 3% 27% 16% 30% 18% 10%

8% 40% 8% 3% 29% 20% 19% 12% 20% 22% 9% 3% 1% 0% 0% 0% -1% -2% -4% -2%

-20% -18% -12% -7%

-40%

-60% -18% -12% -4% FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20

Flows Performance Source SEBi Handbook: I-Sec research Data for FY20 is data upto Dec’19

Table 1: UTI assets under management as on Dec’20 UTI AMC Total asset under management (Rs bn) UTI MF 1,654 PMS 7,506 UTI capital 16 UTI Retirement solution 1,588 UTI International 217 Total 10,981 Source: Company presentation, I-Sec Research

UTI Asset Management Company, February 5, 2021 ICICI Securities

Equity AUM market share is stable now at ~5% Chart 2: UTI AUM’s total market share has seen a Chart 3: …while its equity AUM market share has declining trend… shown signs of stabilising

Overall market share Equity market share 8.5% 8.0% 8.0% 7.0% 7.5% 6.0% 4.7% 7.0% 5.0% 6.5% 4.0% 6.0% 5.5% 5.5% 3.0% 5.0% 2.0% 4.5% 1.0% 4.0% 0.0% Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21

Chart 4: Debt AUM has seen sharp loss in market Chart 5: … while liquid AUM has seen modest share… decline

Debt market share Liquid market share 9.0% 9.5% 8.0% 9.0% 7.0% 8.5% 6.0% 8.0% 5.0% 3.7% 7.5% 7.3% 4.0% 7.0% 3.0% 6.5% 2.0% 6.0% 1.0% 5.5% 0.0% 5.0% Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21

Chart 6: …UTI has been able to maintain market share in ‘others’ segment (which includes ETFs)

Other segment market share 16.0% 14.0% 13.2% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21

Source: AMFI, I-Sec research; Note: Market share analysis is done on closing AUM for UTI and Industry as on end of every quarter.

UTI Asset Management Company, February 5, 2021 ICICI Securities

Overall / Equity AAUM grew at 11% / 9% CAGRs in past 10 years Chart 7: Since Q1FY16, overall AUM CAGR has Chart 8: ..Equity AUM too has clocked 12% CAGR been 9%...

Overall Equity 1,800 700 1,600 600 1,400 500 1,200 1,000 400 800 300 600 (Rs (Rs bn) (Rs (Rs bn) 200 400 200 100 - - Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21

Chart 9: …Debt AUM has registered sharp decline Chart 10: Liquid AUM CAGR has been 8%

Debt Liquid 800 600 700 500 600 400 500 400 300 300 200 (Rs (Rs bn) (Rs (Rs bn) 200 100 100 - - Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21

Chart 11: Strong growth in ETF since Q1FY16

Others 400 350 300 250 200 150

(Rs (Rs bn) 100 50 - Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21

Source: AMFI (based on closing AUM at ever quarter end), I-Sec research

UTI Asset Management Company, February 5, 2021 ICICI Securities

Table 2: Non-MF AUM breakdown (Rs mn) FY18 FY19 FY20 Part of standalone business UTI IIFL Alternate Asset Equity Fund PMS 45 818 696 IIFL Long Term Equity Growth - 42 33

Debt – Business PLI 3,36,658 3,92,020 4,10,890 NSDF 3,615 3,381 2,535 Employees Provident Fund Organisation 8,17,514 9,35,739 59,40,642 Coal Mine Provident Fund - - 5,32,792 Employees State Insurance Fund - - 2,503 Total 11,57,788 13,31,140 68,89,362

HNI Business – AUM 692 718 539

Subsidiaries UTI International 1,87,905 1,18,748 1,57,654 UTI Retirement 6,94,833 9,37,079 12,22,009 UTI Capital 5,575 11,700 13,047 Total 20,46,838 24,00,245 82,83,340 Source: Company, I-Sec research

Table 3: Current AUM and key schemes details Total AUM (Rs bn) Equity (27% of AUM) 448 UTI Equity Fund-Reg(D) 135 UTI Mastershare-Reg(D) 70 UTI Mid Cap Fund-Reg(D) 45 UTI Value Opp Fund-Reg(G) 49

Balanced (7% of AUM) 118 UTI Arbitrage Fund-Reg(G) 32 UTI Hybrid Equity Fund-Reg(G) 38 UTI ULIP(G) 48

Debt (16% of AUM) 275 UTI Corporate Bond Fund-Reg(G) 25 UTI Floater Fund-Reg(G) 23 UTI ST Income Fund-Reg(G) 33 UTI Transportation & Logistics Fund-Reg(D) 14 UTI Treasury Advantage Fund-Reg(G) 30 UTI Ultra Short Term Fund-Reg(G) 16

Liquid (24% of AUM) 406 UTI Liquid Cash Plan-Reg(G) 263 UTI Money Market Fund-Reg(G) 83 UTI Overnight Fund-Reg(G) 60

Others (24% of AUM) 395 UTI-Nifty ETF 209 UTI-Sensex ETF 103

Total 1,677 Source: AMFI, I-Sec research AUM data as on Nov’20

UTI Asset Management Company, February 5, 2021 ICICI Securities

Key funds managed and fund manager details

Table 4: Equity and Balanced funds (AUM as on Nov’20) Rs bn 634

Ajay Tyagi Fund Manager 1 Fund Manager 2 Fund Manager 3

UTI Equity Fund-Reg(D) 135 Ajay Tyagi - - % of total AUM 21% Swati Kulkarni Fund Manager 1 Fund Manager 2 Fund Manager 3

UTI Dividend Yield Fund-Reg(G) 24 Swati Kulkarni - - UTI Mastershare-Reg(D) 70 Swati Kulkarni - - UTI MNC Fund-Reg(D) 22 Swati Kulkarni - - Total 116 % of total AUM 18% Vetri Subramaniam Fund Manager 1 Fund Manager 2 Fund Manager 3

UTI Focussed Equity Fund-VI(G) 4 Vetri Subramaniam Sachin Trivedi Kamal Gada UTI LT Equity Fund (Tax Saving)-Reg(D) 16 Vetri Subramaniam Vishal Chopda - UTI Value Opp Fund-Reg(G) 49 Vetri Subramaniam Amit Premchandani - Total 69 % of total AUM 11% Amandeep Singh Chopra Fund Manager 1 Fund Manager 2 Fund Manager 3

UTI ULIP(G) 48 Amandeep Singh Chopra Ajay Tyagi - % of total AUM 8% V. Srivatsa Fund Manager 1 Fund Manager 2 Fund Manager 3

UTI Hybrid Equity Fund-Reg(G) 38 V. Srivatsa Sunil Patil - % of total AUM 6% Rajeev Gupta Fund Manager 1 Fund Manager 2 Fund Manager 3

UTI Arbitrage Fund-Reg(G) 32 Rajeev Gupta Amit Sharma - % of total AUM 5%

% total Equity and Balanced 69%

Source: ACE MF, I-Sec research

Debt

Amandeep Singh Chopra Nov-2020(Cr.) Fund Manager 1 Fund Manager 2 Fund Manager 3 UTI Overnight Fund-Reg(G) 60 Amandeep Singh Chopra Amit Sharma UTI Floater Fund-Reg(G) 23 Amandeep Singh Chopra Sudhir Agarwal UTI Gilt Fund-Reg(G) 8 Amandeep Singh Chopra UTI Bond Fund-Reg(G) 3 Amandeep Singh Chopra UTI Dynamic Bond Fund-Reg(G) 3 Amandeep Singh Chopra UTI Medium Term Fund-Reg(G) 1 Amandeep Singh Chopra Ritesh Nambiar Total 98

% total of Debt AUM 33%

Sudhir Agarwal Fund Manager 1 Fund Manager 2 Fund Manager 3 UTI ST Income Fund-Reg(G) 33 Sudhir Agarwal - UTI Treasury Advantage Fund-Reg(G) 30 Sudhir Agarwal - UTI Corporate Bond Fund-Reg(G) 25 Sudhir Agarwal Sunil Patil UTI Ultra Short Term Fund-Reg(G) 16 Sudhir Agarwal Ritesh Nambiar UTI Banking & PSU Debt Fund-Reg(G) 3 Sudhir Agarwal

Total 106

% total of Debt AUM 36%

Sunil Patil Fund Manager 1 Fund Manager 2 Fund Manager 3 UTI Fixed Income fund series 86 Sunil Patil - % total of Debt AUM 29%

% total Debt 98%

Source: ACE MF, I-Sec research

UTI Asset Management Company, February 5, 2021 ICICI Securities

SIP flows have been steady with market share of 10%

Chart 12: SIP flows rose in Q3FY21 Chart 13: Average ticket size has slightly declined

Average transaction size (₹) Gross SIP inflow s (₹ in billions) 9.0 2,850 8.0 2,800 7.0 2,750 2,700 6.0 2,650 5.0 2,600 4.0 2,550 3.0 2,500 2,450 2.0 2,400 1.0 2,350 0.0 2,300 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Mar-17 Mar-18 Mar-19 Mar-20 Sep-16 Dec-16 Sep-17 Dec-17 Sep-18 Dec-18 Sep-19 Dec-19 Sep-20 Dec-20 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Mar-17 Mar-18 Mar-19 Mar-20 Sep-16 Dec-16 Sep-17 Dec-17 Sep-18 Dec-18 Sep-19 Dec-19

Chart 14: SIP AUM returning to pre-Covid levels Chart 15: Number of SIP live folios has risen consistently

Closing SIP AUM in billions) SIP Live Folios (in thousands)

140 1,400

120 1,200

100 1,000

80 800

60 600

40 400

20 200

- - Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Mar-17 Mar-18 Mar-19 Mar-20 Mar-17 Mar-18 Mar-19 Mar-20 Sep-16 Dec-16 Sep-17 Dec-17 Sep-18 Dec-18 Sep-19 Dec-19 Sep-20 Dec-20 Sep-16 Dec-16 Sep-17 Dec-17 Sep-18 Dec-18 Sep-19 Dec-19

Chart 16: SIP book tenure mix Chart 17: SIP market share

SIP book SIP Market share

92% 90% 14% 90% 88% 12% 86% 84% 10% 82% 80% 78% 78% 8% 76% 74% 6% 72% 4%

0% More than 5yrs than More More than 10yrs than More Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Mar-17 Mar-18 Mar-19 Mar-20 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 Source: Company, I-Sec research

UTI Asset Management Company, February 5, 2021 ICICI Securities

High B30 AUM mix of 24%

Chart 18: T-30 and B-30 market share

25% T30 market share B30 Market share 21% 20%

14% 15% 13% 13% 12% 11% 9% 9% 10% 8% 8% 8% 7% 7% 5% 6% 4% 5% 3%3%

0% n UTI SBI Axis Birla DSP AMC AMC AMC AMC AMC AMC ICICI AMC AMC AMC Kotak Nippo HDFC Source: Company, I-Sec research

Chart 19: T-30 and B-30 AUM as % of total AUM

Share of T30 AUM Share of B30 AUM

100% 91% 84% 86% 86% 86% 90% 82% 82% 76% 78% 80% 70% 60% 50% 40% 30% 24% 22% 16% 18% 14% 14% 18% 14% 20% 9% 10% 0% UTI AMC UTI AMC SBI Axis AMC Axis Birla AMC Birla DSP AMC DSP ICICI AMC ICICI Kotak AMC Kotak HDFC AMC HDFC Nippon AMC Nippon Source: Company, I-Sec research

UTI Asset Management Company, February 5, 2021 ICICI Securities

Long-term operating profit CAGR can be 3-21% on the basis of +/- 300bps equity AUM market share

We expect overall industry MF AUM to grow at a healthy 15% CAGR between FY21E- FY30E. We expect equity AUM to grow at a higher pace compared to overall industry AUM as demand for equity assets will increase as retail participation increases.

We analysed the operating profit and PAT sensitivity for UTI AMC assuming that it maintains the equity AUM market share currently in the base case, while +/- 300bps change in market share remains bull / bear case scenario respectively. We have also factored decline in yields to factor increase in AUM as well periodic decrease in Total Expense Ratio (TER)

Table 5: Yield projections in all scenarios bps FY19 FY20 FY21E FY22E FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E Liquid/MM Funds 5.23 8.1 6.0 5.5 5.0 4.5 4.0 4.0 3.8 3.8 3.8 3.8 Equity Funds 114.26 103.9 102.0 85.0 80.0 77.0 74.0 71.0 68.0 65.0 62.0 59.0 Etfs & Index Funds 5.02 4.6 4.0 3.8 3.0 3.0 3.5 3.5 3.5 3.5 3.5 3.5 Hybrid Funds 96.94 83.5 84.0 86.0 84.0 81.0 78.0 75.0 72.0 69.0 66.0 63.0 Income Funds 28.01 33.8 31.0 26.0 24.0 14.9 12.5 12.5 12.5 12.5 11.0 11.0 Source: I-Sec research

Base case: Steady Equity AUM market share FY21-TD equity market share for UTI AMC stood at 4.8%. We expect UTI AUM to grow at 16% CAGR to Rs2.5trn in FY30E. This will result in revenue / operating profit / PAT growth of 9% / 17% / 15% respectively

Table 6: Base case scenario (Rs bn) FY21E FY22E FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E Overall Industry AUM 26,886 29,191 33,630 38,919 45,407 53,369 62,320 73,542 85,901 1,00,442 UTI AUM 1,611 1,822 2,071 2,391 2,791 3,195 3,661 4,196 4,742 5,335 Market share 5.99% 6.24% 6.16% 6.14% 6.15% 5.99% 5.87% 5.71% 5.52% 5.31%

Industry Equity AUM 11,007 12,217 14,439 17,254 20,872 25,570 30,659 37,357 44,457 52,892 UTI AMC Equity AUM 544 637 732 873 1,066 1,278 1,534 1,830 2,160 2,535 (incl Hybrid AUM) Market share 4.94% 5.21% 5.07% 5.06% 5.11% 5.00% 5.00% 4.90% 4.86% 4.79%

Revenue (Mgmt fees) 7,739 8,036 8,618 9,364 10,704 12,112 13,727 15,463 17,108 18,926 Operating profit 2,206 2,645 3,177 4,005 5,283 6,536 8,054 9,635 11,105 12,749 Source: I-Sec research

UTI Asset Management Company, February 5, 2021 ICICI Securities

Bull case: Equity AUM market share increase 300bps to 7.8% FY21-TD equity market share for UTI AMC stood at 5.6% and we expect it to increase it to 7.8% till FY30E. We expect UTI AUM to grow at 21% CAGR to Rs4.1trn in FY30E. This will result in revenue / operating profit / PAT growth of 14% / 24% / 21% respectively

Table 7: Bull case scenario (Rs bn) FY21E FY22E FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E Overall Industry AUM 26,886 29,191 33,630 38,919 45,407 53,369 62,320 73,542 85,901 1,00,442 UTI AUM 1,611 1,822 2,071 2,503 3,056 3,673 4,359 5,124 5,956 6,917 Market share 5.99% 6.24% 6.16% 6.43% 6.73% 6.88% 6.99% 6.97% 6.93% 6.89%

Industry Equity AUM 11,007 12,217 14,439 17,254 20,872 25,570 30,659 37,357 44,457 52,892 UTI AMC Equity AUM 544 637 732 986 1,331 1,756 2,231 2,758 3,374 4,117 (incl Hybrid AUM) Market share 4.94% 5.21% 5.07% 5.71% 6.38% 6.87% 7.28% 7.38% 7.59% 7.78%

Revenue (Mgmt fees) 7,739 8,036 8,618 10,237 12,680 15,531 18,503 21,533 24,673 28,316 Operating profit 2,206 2,645 3,177 4,877 7,259 9,954 12,830 15,705 18,670 22,139 Source: I-Sec research

Bear case: Equity AUM market share decline 300bps to 1.7% FY21-TD equity market share for UTI AMC stood at 5.6%. We expect UTI AUM to grow at 4% CAGR to Rs0.9trn in FY30E. This will result in revenue / operating profit / PAT growth of 2% / 1% / 3% respectively

Table 8: Bear case scenario (Rs bn) FY21E FY22E FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E Overall Industry AUM 26,886 29,191 33,630 38,919 45,407 53,369 62,320 73,542 85,901 1,00,442 UTI AUM 1,611 1,822 2,071 2,286 2,532 2,756 2,995 3,253 3,488 3,716 Market share 5.99% 6.24% 6.16% 5.87% 5.58% 5.16% 4.81% 4.42% 4.06% 3.70%

Industry Equity AUM 11,007 12,217 14,439 17,254 20,872 25,570 30,659 37,357 44,457 52,892 UTI AMC Equity AUM (incl Hybrid AUM) 544 637 732 769 807 840 868 888 906 915 Market share 4.94% 5.21% 5.07% 4.46% 3.87% 3.28% 2.83% 2.38% 2.04% 1.73%

Revenue (Mgmt fees) 7,739 8,036 8,618 8,545 8,757 8,941 9,110 9,211 9,162 9,146 Operating profit 2,206 2,645 3,177 3,186 3,336 3,364 3,437 3,383 3,159 2,969 Source: I-Sec research

UTI Asset Management Company, February 5, 2021 ICICI Securities

Q3FY21 result review: Strong show

Maintains equity market share, higher employee cost resulted in weak operating performance. However, there is up fronting ESOP cost, performance linked variable pay which one can consider as long term investments.

The core operating profit in 9MFY21 stands at ~Rs1.5bn.  QAAUM came in at Rs1.65trn up 5.3% YoY and 6.5% QoQ. - Overall market share dipped marginally by 6bps to 5.56%.  Equity + Hybrid QAAUM came in at Rs649.4bn up 6.4% YoY and 8.7% QoQ. The mix stands at 39.27% of the total AUM as of Dec’20 (38.51% in Sep20) - Market share improved marginally by 5bps to 5.43% QoQ. - Rs9.2bn fund mobilised through NFO of UTI small cap fund in this quarter.  Debt market share dipped but momentum turning back. Debt market share has decreased from 4.1% in Q2FY21 to 3.9% in Q3FY21. FY21YTD, income fund net sales have been around ~Rs8bn (net redemption of Rs125bn in 9m FY20TD). Post relaunching (short term fund, treasury, ultra-advantage fund) in Q2FY21 some green shoots have been visible (Rs5bn net sales mobilisation in Q2FY21, Rs25bn net sales mobilisation in Q3FY21) - SIP flow Rs8.2bn in Q3FY21 compared to Rs7.6bn in Q2FY21. - Ex MF, AUM stands at Rs9.3tn, up 24% YoY.  Management fees rose 7% YoY while total income grew 40% YoY driven by higher investment income. On standalone basis, management fees came in at Rs1.9bn up 6% YoY and as % of AUM came in 46bps (flat YoY and QoQ basis). There is no major disappointment in management fees on the back of steady equity markets share.  Standalone operating profit as % of AUM was 11.5bps, down 7bps / 5bps YoY / QoQ.  Q3/9MFY21 PAT stood at Rs1.4/3.6bn up 67% / 21% YoY.  Employees cost increased 53% YoY and 27% QoQ, while other expenses declined 11% YoY and 6% QoQ. Employee cost % of AUM increased to 26bps up 8bps YoY and 5bps QoQ. - ESOP cost is up fronted as per accounting. Out of total Rs580mn ESOP cost to be counted between FY20-23, Rs300mn is supposed to be provided in FY21. - Sequentially, increase in employee cost is driven by higher variable pay. - The total increase in employee cost of Rs750mn in the 9m FY21 was driven by (1) Rs250mn amortisation of ESOP cost, (2) Rs120mn non managerial pay settlement (3) Rs230mn of variable pay and (4) Rs70mn of actuarial adjustment. - Company remains committed to save total Rs~850mn over the period of 2020- 25 on the back of senior exits. Even after replacement, employee cost savings will be Rs650mn by 2025.

UTI Asset Management Company, February 5, 2021 ICICI Securities

 Focus on boosting institutional AUM with 4 cities of Mumbai, Delhi, Bengaluru and Chennai: Better fund performance would lead to better fund mobilisation among institutional clients which can help the debt market share to recover. UTI has reviewed the entire risk management committee under the aegis of the board. Company has hired three more credit analysts. Most of the clients have started to reinvest. There is deepening engagement programs (including CEO/CIO) to boost this segment.  Distribution initiatives focus around (1) improving engagement with trop 25 IFAs in each of the top cities (2) improving the bank distribution through tie ups with Punjab National Bank (equity and hybrid gross sales market share of 19%), Bank of Baroda (equity and hybrid gross sales market share of 7.5%), State Bank of India, NJ invest (did market the recent NFO), HDFC bank, Kotak bank, Citi bank and Standard Chartered (3) marketing fund performance effectively and (4) capitalising the pricing advantage. UTI is going to open 6 new branches in Q4FY21.  Fund performance has been good. As of Dec’20, 85% of the total fund is in quartile 1 on one-year basis and 75% of the total fund is in quartile 2 on a three- year basis.  UTI International: AUM of UTI International has excelled in terms of equity. The Dynamic Equity Fund has risen to US$650mn (managed by Ajay Tyagi) on the back of remarkable performance. However, fixed income fund saw serious outflow with the ILFS saga taking the total debt corpus from US$350mn to US$50mn. However, UTI raised US$80mn through ESG fund with foreign partner collaboration. UTI also launched a balanced fund. UTI is well in place to capture the international markets. Brexit might require to open some additional offices.  Folio count has increased by 15,000 in FY21TD despite exit of more than 100,000 folios due to the maturity redemption of two equity funds.

Table 9: Consolidated P/L (Rs mn) Q3FY21 Q3FY20 YoY Q2FY21 QoQ Revenue from Operations Interest Income 33 32 2% 46 -28% Dividend Income 0 1 -83% 0 Rental Income 27 20 34% 25 6% Net Gain on Fair Value Changes 1,156 357 591 95% Sale of Services 2,118 1,981 7% 1,993 6% Others - Net Gain/Loss on sale of Investments 85 55 56% 104 -18% Revenue from Operations 3,419 2,445 40% 2,760 24%

Other Income 63 40 60% 110 -42% Total Income 3,482 2,485 40% 2,869 21%

Expenses Fees and Commission Expense 9 8 10% 6 52% Finance Cost 23 19 22% 23 -3% Employee Benefit Expenses 1,161 756 53% 911 27% Depreciation, amortisation and impairment 95 80 18% 92 4% Other Expenses 394 440 -11% 372 6% Total Expenses 1,681 1,303 29% 1,403 20% Profit/(Loss) before exceptional items 1,801 1,182 52% 1,466 23%

Exceptional items Profit Before Tax 1,801 1,182 52% 1,466 23% Total Tax expense 399 284 41% 281 42% Profit for the year 1,402 898 56% 1,185 18% Source: Company, I-Sec research

UTI Asset Management Company, February 5, 2021 ICICI Securities

Table 10: Standalone – P/L (Rs mn) Q3FY21 Q3FY20 YoY Q2FY21 QoQ AUM (Rs mn) 16,53,590 15,71,190 5% 15,51,901 7%

Sale of services 1913 1802 6% 1811 6% Others operating 690 392 76% 448 54% Other income 60 75 105 Total Income 2663 2270 17% 2364 13%

Expenses Fees and commission 15 15 1% 12 24% Employee 1,076 686 57% 824 31% Others 258 305 -15% 256 1% Depreciation 90 80 13% 87 4% Fin cost 23 19 20% 23 -2% Total 1,461 1,105 32% 1,202 22% PBT 1,202 1,165 1,161 Tax 394 294 278 PAT 808 871 -7% 883 -9% Source: Company, I-Sec research

Table 11: Standalone P/L – Income / Expense % of AUM (Rs mn) Q3FY21 Q3FY20 YoY Q2FY21 QoQ AUM (Rs mn) 16,53,590 15,71,190 5% 15,51,901 7%

Management fees (A) 46.3 45.9 0.4 46.7 -0.4 Other operating Income 16.7 10.0 6.7 11.5 5.2

Employee cost 26.0 17.5 8.6 21.2 4.8 Other expenses 6.6 8.1 -1.5 6.9 -0.3 Depreciation 2.2 2.0 0.2 2.2 -0.1 Total Operating cost (B) 34.8 27.6 7.2 30.4 4.4 Operating profit (A-B) 11.5 18.2 -6.8 16.3 -4.8

Fin cost 0.5 0.5 0.1 0.6 -0.1 PBT 29.1 29.7 -0.6 29.9 -0.9 Tax 9.5 7.5 2.1 7.2 2.4 PAT 19.5 22.2 -2.6 22.8 -3.2 Source: Company, I-Sec research

UTI Asset Management Company, February 5, 2021 ICICI Securities

Company background

UTI AMC’S predecessor, Unit Trust of India, was established in 1964 pursuant to the UTI Act passed in 1963 by an Act of the Parliament and over time grew into one of the largest financial intermediary institutions in India, catering to a diverse group of investors through a wide variety of funds. In 2002, Unit Trust of India was bifurcated into two separate entities: SUUTI, which was vested with the assets of Unit Trust of India’s flagship fund, Unit Scheme 1964 and assured return funds, and UTI Mutual Fund, which was established as a SEBI-registered mutual fund with State Bank of India, Life Insurance Corporation, Punjab National Bank, and Bank of Baroda as its sponsors. In this process, 38 SEBI-registered funds and five offshore funds of Unit Trust of India were transferred to UTI Mutual Fund. UTI AMC was incorporated on 14th Nov’02 and appointed by UTI Trustee Company Private Limited, as the trustee of UTI Mutual Fund, to manage the funds of UTI Mutual Fund. UTI AMC was converted into a public limited company on 1th Nov’07. In Jan’10, T. Rowe Price Group Inc., through its wholly-owned subsidiary, T. Rowe Price International Ltd, acquired a 26% stake in the company. UTI AMC successfully completed its IPO and listing in Oct’20. Post IPO, T. Rowe Price owned 23% stake (details of remaining shareholders and their percentage stakes are mentioned in Table 3).

Table 12: UTI AMC structure Investment manager to UTI MF, support services to SUUTI, investment manager to UTI AMC Ltd offshore funds and PMS (includes EPFO, CMPFO, ESIC and postal life funds) UTI International Ltd Manager for international (offshore) funds (100%) (100% subsidiary) UTI Ventures Manager for venture funds (100%) UTI Retirement Manager for pension funds (100%) UTI Capital Manager for private equity & structured debt funds (100%) Source: Company, I-Sec research

UTI Venture Funds

UTI Venture Funds Management is a wholly owned subsidiary of UTI Asset Management. The Company's business consists of managing Private Equity and Venture Funds. The Company has a wholly owned subsidiary, UTI Private Equity Limited, Mauritius. The subsidiary Company is a holder of 100 management shares having a face value of USD 1 each in the offshore pooling vehicle of Fund II viz Ascent India Limited. In addition to the management shares, Ascent India Limited has issued Class A and B Participating Shares at the face value of USD 100 each. The management shares do not carry any economic interest in the form of dividends, are not be redeemable but carry voting rights in the investment Company. Only the Participating shares carry the beneficial interest in the investment Company, are redeemable, entitled to dividends but are not entitled to voting rights in the investment Company. Upon liquidation of the investment Company, the management shareholders are entitled to receive their nominal capital only, subject to a maximum of $100. The management is of the opinion that since the management shares of the Company in Ascent India Limited do not have any economic benefits, consolidation of the financial statements of Ascent India Limited with UTI Private Equity Advisors as per Ind AS 110 will not be proper.

UTI Asset Management Company, February 5, 2021 ICICI Securities

UTI International

UTI International Limited (the ‘Company’, the ‘Group’ or ‘UTI International’) is a 100% subsidiary of UTI Asset Management Company Limited, a company incorporated in India (‘UTI AMC’). UTI International operates from its head office (HO) in Guernsey and its branch in London. UTI International has two wholly owned subsidiaries - UTI Investment Management Company (Mauritius) Limited (‘UTI Mauritius’) in Mauritius and UTI International (Singapore) Private Limited (‘UTI Singapore’) in Singapore. The Company, UTI Mauritius and UTI Singapore collectively form the UTI International Group (the ‘Group’). The principal activities of the Group are the management and marketing of the Mauritius, Cayman and Ireland domiciled offshore funds setup by the erstwhile Unit Trust of India (‘UTI’) or UTI AMC and its subsidiaries, marketing of the domestic mutual fund schemes of UTI AMC in overseas markets and acting as Manager/ Advisor to those entities investing in India through the Foreign Portfolio Investor (‘FPI’) route / regime. The Company manages The UTI India Fund Limited (‘India Fund’), The India Pharma Fund Limited. (‘Pharma Fund’), The India Debt Opportunities Fund Limited (IDOF). However, IDOF now stands redeemed as of March 19, 2019. UTI Mauritius acts as an investment Manager to Shinsei UTI India Fund (Mauritius) Limited (‘Shinsei Fund’), The UTI Rainbow Fund Limited (‘Rainbow Fund’), and UTI Wealth Creator Fund. UTI Singapore acts as manager to UTI Spectrum Fund Limited (‘Spectrum Fund’), South African Rand Money Market Fund, UTI Indian Fixed Income Fund Plc, UTI Phoenix Fund SPC, UTI Chronos Fund SPC, UTI Goldfinch Funds Plc, Indian Credit Opportunities Fund Pte. Ltd. and acts as sub- manager to United China India Dynamic Growth Fund, Emirates Islamic India Equity Fund, KB India Growth Fund, India Dynamic Equity Fund and India Balanced Fund.

UTI Retirement solutions (UTI RSL)

UTI RSL manages the pension funds and assets of Central and State Government Employees and employees of the private sector. UTI RSL is engaged in the business of carrying out the operations as pension fund manager as directed by the Pension Fund Regulatory and Development Authority (“PFRDA”) and the Board of Trustees of the National Pension System Trust set up under the Indian Trust Act, 1882, and to undertake wholesale asset management as prescribed by the Government or PFRDA as authorized by its memorandum of association

UTI Asset Management Company, February 5, 2021 ICICI Securities

Table 13: Key schemes of UTI retirement solutions Name of schemes (Rs bn) FY20 FY19 NPS Trust – A/C UTI Retirement Solutions Pension Fund Scheme E – Tier I 3.7 3.8 NPS Trust – A/C UTI Retirement Solutions Pension Fund Scheme C – Tier I 3.0 2.2 NPS Trust – A/C UTI Retirement Solutions Pension Fund Scheme G – Tier I 4.8 3.3 NPS Trust – A/C UTI Retirement Solutions Pension Fund Scheme A – Tier I 0.0 0.0 NPS Trust – A/C UTI Retirement Solutions Scheme E – Tier II 0.2 0.2 NPS Trust – A/C UTI Retirement Solutions Scheme C – Tier II 0.2 0.1 NPS Trust – A/C UTI Retirement Solutions Scheme G – Tier II 0.2 0.2 NPS Trust – A/C UTI Retirement Solutions Pension Fund Scheme – Central Govt. 461.0 365.6 NPS Trust – A/C UTI Retirement Solutions Pension Fund Scheme – State Govt. 703.8 529.4 NPS Trust – A/C UTI Retirement Solutions Ltd. – NPS Lite Scheme –Govt. Pattern 10.6 9.7 NPS Trust – A/C UTI Retirement Solutions Pension Fund Scheme –Corporate CG - - NPS Trust – A/C UTI Retirement Solutions Scheme – Atal Pension Yojana 34.5 22.6 Total 1,222.0 937.1 Source: Company, I-Sec research

UTI Capital Private Ltd

UTI Capital is currently acting as Investment Manager to two SEBI regulated investment funds, viz India Infrastructure Development Fund (IIDF) and UTI Structured Debt Opportunities Fund I (SDOF). IIDF is an infrastructure focused private equity fund sponsored by UTI AMC Ltd. It achieved the initial closing on May 12, 2010 with commitments from domestic as well as offshore institutional investors. Subsequently, the investment management of IIDF was transferred to your company with effect from July 1, 2011. Currently IIDF has approximately Rs4.1bn (Previous Year Rs4.1bn) under management and has cumulatively drawn down approximately 83.5% (Previous Year 83.5%) of the committed capital. The current invested capital of IIDF is Rs.2bn (Previous year Rs2.5bn) across two unlisted companies viz. Bumi Engineering Ltd., and Indian Oiltanking Ltd. During the year, the fund disposed off its investment held in Bharat Light & Power Private Limited.

Table 14: UTI Capital FY19 FY20

Revenue 7.408 3.804 EBITDA 6 -8 Other Income 0.3 3.6 Depreciation 0.01 0 PBT -4.1 -7.6 Tax 1.1 0.6 PAT -8.7 -4.7 Source: Company, I-Sec research

India Infrastructure development fund

UTI AMC has a 25.87 per cent investment in the India Infrastructure Development Fund where UTI Capital is the investment manager. The investment manager through the Investment management agreement (IMA) has a right to carry out all other relevant activities as per its discretion and the investment manager can only be removed with cause.

SDOF is a private debt fund registered with SEBI as a Category II AIF in August, 2017. UTI Capital is the Investment Manager of the fund and SDOF is the first scheme of the Trust. The objective of SDOF is to generate superior risk adjusted returns for its investors by investing in debt securities of various companies. SDOF announced its

UTI Asset Management Company, February 5, 2021 ICICI Securities

first close on November 15, 2017. The total commitments as on March 31, 2020 were approx. Rs8.1bn (Previous Year Rs 6.7bn) and the total amount drawn down from investors as on 31 March 2020 is Rs6.9bn (Previous year Rs.3.6bn). As on 31 March 2020 SDOF has outstanding investments in nine companies aggregating Rs.5.5bn (Previous year five Companies aggregating Rs3.5bn. UTI Capital has also been appointed as Investment Advisor to a Mauritius based fund called ‘Pragati India Fund Ltd’(PIFL). CDC, the Development Financial Institution of Government of UK is the majority investor in PIFL. The current assets under management by PIFL is approx Rs934mn (Previous Year Rs934.2mn) across three companies viz PTC Industries Ltd, Saija Finance Pvt Ltd and DCDC Health Services Pvt Ltd, Out of the three companies, the first company is listed while the remaining are unlisted. As per the advisory agreement signed with PIFL, UTI Capital will undertake monitoring of the portfolio and make best efforts to enhance value and provide advice on exit from the various companies. UTI Capital has also applied to SEBI for launching a new scheme (UTI Structured Debt Opportunities Fund II) under UTI Emerging India Opportunities Fund, a category 2 AIF previously approved by SEBI. SEBI approval to launch the scheme is in process.

UTI Capital currently generates investment management fee from UTI SDOF I and advisory fee from PIFL. UTI SDOF I has sufficient liquidity to meet its liabilities, including management fee to UTI Capital, for the remainder of its fund life. The Company also earns advisory fee from PIFL. Further IIDF has sufficient liquidity to meet its operational expenses for the next two years at-least.

Table 15: Key managerial personnel Person Designation Imtaiyazur Whole-time Director and the Acting Chief Executive Officer Rahman Surojit Saha Senior Executive Vice President, Chief Financial Officer, Head (AMC and SUUTI) Accounts Amandeep Chopra Group President and Head of Fixed Income Vetri Group President and Head of Equity Subramaniam Vivek Maheshwari Head of Risk and Compliance Executive Assistant to Managing Director and Head of Corporate Strategy and Sandeep Samsi Communications Gaurav Suri Senior Executive Vice President and Head of Marketing Source: Company, I-Sec research

Board of Directors

Table 16: Board of director (eight independent directors; one whole-time director and two non-executive directors) Name of Directors Category Mr. Dinesh Kumar Mehrotra Non-Executive Chairman and Independent Director Mr. Ashok Shah Independent Director Mr. Deepak Kumar Chatterjee Independent Director Ms. Dipali Sheth Independent Director Mr. Edward Cage Bernard Non-Executive Non Independent Director Mr. Flemming Madsen Non-Executive Non Independent Director Mr Imtaiyazur Rahman Whole-time Director and Chief Executive Officer Ms. Jayashree Vaidhyanathan(7) Independent Director Mr. Narasimhan Seshadri Independent Director Mr. Rajeev Kakar Independent Director Ms. Uttara Dasgupta Independent Director Source: Company, I-Sec research

UTI Asset Management Company, February 5, 2021 ICICI Securities

Committee composition

Table 17: Committee composition Risk management Audit committee NRC committee Independent Director 3 3 4 Non-Executive Non Independent Director 1 1 1 Whole-time Director and Chief Executive Officer 0 0 0 Source: Company, I-Sec research

ESOP exercise price higher than current market capitalisation

Company introduced an Employee Stock Option Scheme called the “UTI AMC Employee Stock Option Scheme – 2007”. Each employee on the rolls as on 16th Dec’19 and a few from its subsidiaries were granted options. The vesting of the options is from expiry of one year from grant date till four years from grant date as per the plan.

Table 18: UTI ESOP details Total options granted 7.01

Total options vested 3.74

Options exercised 1.32

Options vested and not exercised 2.42

Total number of equity shares that would arise as a result of full exercise of options 2.19 granted Options lapsed 3.50 - Money realised by exercise of options (Rs) 267

Total number of options in force 2.19

Exercise price 728

No. of equity Issue Options exercised shares price allotted 22nd Aug’14 0.04 260 22nd Aug’14 0.55 200 24th Feb’15 0.73 200 Total 1.32

Money realised by exercise of options (Rs) 267

Based on exercise price, valuation stands at

Current o/s 127

ESOP in force 2

Total O/S (mn) 129

Exercise price 728

MCap (Rs mn) 93,896

Source: Company, I-Sec research

UTI Asset Management Company, February 5, 2021 ICICI Securities

Dividend policy of at least 50% payout

The Board of Directors may declare dividend equivalent to 50% or more of the PAT of the company after considering the statutory and regulatory factors and other external factors. Board shall review the dividend distribution policy at least once in every three years.

Table 19: Shareholding pattern as on 30th Dec’20 % holding T. Rowe Price International Ltd. 23.00 Punjab National Bank 15.24 State Bank of India 9.99 Life Insurance Corporation of India 9.99 Bank of Baroda 9.99 Retail Shareholders 9.86 Mutual Funds 13.65 Foreign Portfolio Investors 5.20 Alternate Investment Funds 0.84 Others 2.24 Source: Company, I-Sec research

UTI Asset Management Company, February 5, 2021 ICICI Securities

Cost comparison with peers

UTI’s cost structure has room for improvement

Chart 20: UTI earns lower revenues vis-à-vis peers due to higher mix of passive funds Revenue - Investment mgmt fees 36.2 47 57 55 57.3 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 11,897 8,900 10,333 18,364 19,653 - SBI AMC UTI AMC Nippon AMC ICICI Prudential HDFC AMC AMC Source: Company annual report, I-Sec research

Chart 21: Employee cost is highest for UTI AMC Employee cost 7.1 20 15 8 6.3 3,500

3,000

2,500

2,000

1,500

1,000

500 2,324 3,399 2,842 2,717 2,147 - SBI AMC UTI AMC Nippon AMC ICICI Prudential HDFC AMC AMC Source: Company annual report, I-Sec research

UTI AMC had 955 managerial and 406 non managerial staff as of FY20 end. Almost ~250 senior level employees are expected to retire due to superannuation over the next 5 years out of which ~75 would retire by FY23. The salary levels of senior people are significantly above the mean level. As such, even after requisite hikes, the employee cost is expected to stay flattish/modest hike at Rs3.6bn levels over the next 5 years.

UTI Asset Management Company, February 5, 2021 ICICI Securities

Chart 22: Other expenses as % of AUM is also highest for UTI AMC Other expenses 7.9 13 14 8 6.3 3,000

2,500

2,000

1,500

1,000

500 2,585 1,918 2,383 2,634 2,164 - SBI AMC UTI AMC Nippon AMC ICICI Prudential HDFC AMC AMC Source: Company annual report, I-Sec research

Cost control has Chart 23: Higher costs have led to lower operating margins… been a focus area for Operating profits the company which 20.3 12.7 26.2 37.4 43.2 16,000 should yield results ahead. On a simple 14,000 elementary 12,000 calculation, if UTI is 10,000 able to improve its 8,000 cost to industry median levels, the 6,000 company can save 4,000 Rs988mn cost on an 2,000 AUM base of 6,686 3,413 4,700 12,968 14,838 - Rs2.15trn. SBI AMC UTI AMC Nippon AMC ICICI Prudential HDFC AMC AMC Source: Company annual report, I-Sec research

Chart 24: …and PAT… PAT 18.4 16.2 20 31.15 36.8 14,000

12,000

10,000

8,000

6,000

4,000

2,000 6,058 2,715 5,653 10,459 12,623 - SBI AMC UTI AMC Nippon AMC ICICI Prudential HDFC AMC AMC Source: Company annual report, I-Sec research

UTI Asset Management Company, February 5, 2021 ICICI Securities

Chart 25: …and core PAT (explain) Core PAT 16.4 11.3 21 30.54 33.7 12,000

10,000

8,000

6,000

4,000

2,000 5,395 1,892 3,801 10,254 11,553 - SBI AMC UTI AMC Nippon AMC ICICI Prudential HDFC AMC AMC Source: Company annual report, I-Sec research Core PAT excludes ‘other income’

Chart 26: RoEs have trended lower, but can improve to 14% / 11% / 11% in FY21 / FY22 / FY23 respectively HDFC AMC IPRU Nippon India SBI MF Aditya Birla UTI 90 83 80 75 68 70 66

60 52 50 44 42 43 40 37 38 40 36 35 37 36 31 28 29 30 30 24 23 22 20 21 20 20 16 14 16 10 10 - FY16 FY17 FY18 FY19 FY20

Source: Company annual report, I-Sec research

UTI Asset Management Company, February 5, 2021 ICICI Securities

Improvement in cost structure to industry median levels can lead to incremental operating profit of 5bps of AUM

We have given an analysis indicating that if UTI moves to a lower cost structure, it can grow its operating profits by 43%. For the purpose of calculation of lower cost structure, we have taken median expenses as a percentage of AUM based on FY20 financials for key AMCs.

Table 20: Expected growth in operating profit if UTI reduces its cost structure FY22E (based on lower FY22E % chg cost structure) MF AUM (including international) 20,50,162 20,50,162 Net Revenues 7,638 7,638 Employee Costs 3603 2,177 -40% % of AUM 17.57 10.62 Other costs 1,743 2,181 25% % of AUM 8.50 10.64 Operating profit 2,291 3,279 43% % of AUM 26.08 21.26 Source: I-Sec research

UTI employee costs has headroom to improve from 20bps in FY20 to 11bps in FY25

Chart 27: Employee cost as % of AAUM

Employee expenses ( consol emp cost / (UTI MF + international AUM))

25.0 20.3 20.6 20.0 17.6 14.9 15.0 12.9 11.1 10.0

5.0

0.0 FY20 FY21 FY22 FY23 FY24 FY25

Source: I-Sec research

UTI’s employee costs are highest among its peers. However, over the next few years,250 employees are likely to retire. Management highlighted that a large number of the retiring non-managerial staff will not be required. In terms of retiring relationship managers, low-cost employees will be replaced with them. Tentatively, this will cumulatively save Rs650mn-700mn over four years and thereafter savings will be around 10-15% of current employee costs.

UTI Asset Management Company, February 5, 2021 ICICI Securities

Detailed revenue breakup: 79% comes from India MF and 5% from UTI International

Table 21: Detailed revenue breakup H1FY21 Mix Standalone UTI AMC 4232 79% Management fees 3,100 58% Other operating Income (income from EPFO, PMS, offshore) 95 2% SUUTI 50 1% Investment income 987 18%

Subsidiary UTI international Management fees 266.1 5% Investment income 670.0 12%

UTI Capital 37 1% UTI Venture - UTI RSL (NPS Fund Management) 69 1%

Rental Income 50 1% Interest Income 75 1% Dividend Income 1 0%

Total 5,400 100% Inter-company elimination -26 0% Total consolidated revenues 5,373 100% Source: I-Sec research

Table 22: Detailed consolidated PAT breakup Consolidated PAT H1FY21 Mix UTI Asset Management Company Limited (standalone) 88 75% UTI International Ltd 28 24% UTI Capital 1 0% UTI Retirement & Solutions Ltd 1 1% UTI Venture & IIDF 0 0% Inter Company Elimination & Minority Interest 0 0% 119 Source: I-Sec research

Table 23: Brief overview of reasons for lower profits in FY20 FY20 Consolidated Profits (Rs mn) 2715 Major loss items in FY20 Equity M2M loss of AMC Investment Portfolio 121 Depreciation in Q4 in Ascent India Fund III (Current AUM: Rs1300mn) 111 Depreciation in Q4 in SDOF (Current AUM: Rs1600mn) 30 Deferred Tax Impact of Ascent India I * 109 UTI International Ltd** (International fund) 630 Proforma Profits (without losses) (Rs mn) 3716 Note: * Since Ascent India Fund I has been closed, the Deferred Tax Asset is reversed to Deferred Tax Liabilities **PAT of UTI international was impacted due to M-M loss in India Dynamic equity fund of Rs63crs

UTI Asset Management Company, February 5, 2021 ICICI Securities

Distribution is a focus area

UTI has a wide distribution network in India, which gives access to investors located in 695 of the 722 districts in the country, highest in the country. UTI has total of 163 branches of which 106 are situated in B-30 cities as at Dec’20. Company has a strong distribution network of ~55,700 MF distributors.

Table 24: Channels of distribution for total AUM As on 30th Dec’20 As of March 31, Channel 2020 2019 2020 2019 2018 IFAs 29% 29% 29.9% 31.6% 31.1% BND 9% 12% 11.1% 13.9% 14.4% Direct 62% 57% 59.0% 54.5% 54.5% Total 100.0% 100.0% 100.0% 100.0% 100.0% Source:Company, I-Sec research

Table 25: Channels of distribution for equity AUM As of 30th Jun’20 As of March 31, Channel 2020 2019 2020 2019 2018 IFAs 60.4% 62.3% 60.1% 62.6% 61.0% BND 9.8% 10.3% 10.3% 10.1% 9.5% Direct 29.8% 27.4% 29.6% 27.3% 29.5% Total 100.0% 100.0% 100.0% 100.0% 100.0% Source: I-Sec research Bank networks includes Citibank, Standard Chartered Bank, SBI, PNB, BoB, ICICI Bank, Axis Bank, and HDFC Bank Note: Data for equity distribution is taken from RHP.

UTI Asset Management Company, February 5, 2021 ICICI Securities

Fund performance tracker

Table 26: UTI equity fund performance vis-à-vis peers 31st Dec 2020 Ranks

1-year 3-years 5-years 10-years 1-year 3-years 5-years 10-years Aditya Birla Sun Life Equity Fund 8.5 11.6 10.5 11.7 17 15 6 8 Axis Multicap Fund 17.2 1 Baroda Multi Cap Fund 8.9 9.5 5.7 7.2 16 25 22 21 BNP Paribas Multi Cap Fund 13.2 12.4 9.1 12.6 7 10 9 5 Canara Robeco Equity Diversified Fund 12.3 16.0 8.9 11.5 9 1 13 9 DSP Equity Fund 17.0 14.9 9.4 11.3 2 4 8 11 Edelweiss Multi Cap Fund 8.4 14.9 18 3 Essel Multi Cap Fund 13.1 8 Franklin India Equity Fund 3.3 8.9 7.2 11.8 31 26 18 7 HDFC Equity Fund 6.8 12.1 7.5 11.3 21 13 15 12 HSBC Multi Cap Equity Fund 6.2 10.0 6.6 10.5 24 23 20 17 ICICI Prudential Multicap Fund 6.0 10.8 9.1 11.5 25 18 11 10 IDBI Diversified Equity Fund 6.3 10.2 7.2 23 21 17 IDFC Multi Cap Fund 7.6 10.7 7.4 13.8 20 19 16 2 Invesco India Multicap Fund 4.6 10.2 7.5 15.7 27 22 14 1 JM Multicap Fund 16.6 15.4 10.6 8.7 3 2 5 18 Kotak Standard Multicap Fund 12.3 14.3 11.0 13.4 9 6 2 3 LIC MF Multicap Fund 13.7 9.7 4.5 7.3 6 24 25 20 L&T Equity Fund 4.9 10.3 6.9 10.8 26 20 19 15 Mahindra Manulife Multi Cap Badhat Yojana 13.8 5 Motilal Oswal Multicap 35 Fund 7.9 12.5 12.1 19 9 1 Nippon India Multi Cap Fund 2.2 12.1 5.7 12.7 32 14 21 4 Parag Parikh Long Term Equity Fund 14.4 13.8 10.6 4 7 4 PGIM India Diversified Equity Fund 10.0 11.4 15 16 Principal Multi Cap Growth Fund 3.9 12.2 9.1 11.1 30 12 10 14 Quant Active Fund 4.0 12.4 9.5 10.5 29 11 7 16 SBI Magnum MultiCap Fund 11.0 12.8 10.8 11.2 13 8 3 13 Shriram Multicap Fund 6.5 22 Tata Multicap Fund 10.5 14 Taurus Starshare (Multi Cap) Fund 4.1 8.1 4.6 8.6 28 27 24 19 Union Multi Cap Fund 11.8 11.3 5.2 11 17 23 UTI Equity Fund 11.7 14.6 9.0 12.1 12 5 12 6 Source: AMFI, I-Sec research

UTI Asset Management Company, February 5, 2021 ICICI Securities

Table 27: UTI master share fund performance vis-à-vis peers 31st Dec 2020 Ranks

1-year 3-years 5-years 10-years 1-year 3-years 5-years 10-years Aditya Birla Sun Life Frontline Equity Fund 7.6 10.9 8.2 11.3 25 22 15 6 Axis Bluechip Fund 18.6 20.3 10.7 1 1 2 Baroda Large Cap 12.1 9.8 6.1 13 24 25 BNP Paribas Large Cap Fund 17.2 15.5 9.0 12.0 2 4 8 3 Canara Robeco Bluechip Equity Fund 15.7 16.2 9.8 3 2 3 DSP Top 100 Equity Fund 14.8 12.2 7.7 9.5 6 17 20 15 Edelweiss Large Cap Fund 11.5 14.9 8.9 11.1 18 5 9 7 Essel Large Cap Equity Fund 11.7 12.0 8.8 16 19 11 Franklin India Bluechip Fund 5.3 8.6 6.8 9.7 27 25 24 14 HDFC Top 100 Fund 7.7 12.5 7.7 10.7 24 14 19 9 HSBC Large Cap Equity Fund 15.1 13.3 8.8 9.1 4 9 12 18 ICICI Prudential Bluechip Fund 9.8 13.1 9.2 12.5 22 10 6 2 IDBI India Top 100 Equity 12.7 10.7 7.3 11 23 22 IDFC Large Cap Fund 10.6 12.4 7.1 8.7 20 15 23 19 Indiabulls Bluechip 12.0 13.8 9.7 15 7 4 Invesco India Largecap Fund 10.5 12.2 8.7 10.2 21 18 13 12 JM Large Cap Fund 4.9 8.5 5.1 6.7 28 27 27 21 Kotak Bluechip Fund 14.2 13.0 9.0 10.4 8 11 7 10 LIC MF Large Cap Fund 15.0 13.6 7.9 9.2 5 8 17 17 L&T India Large Cap Fund 13.2 12.9 7.7 10.8 9 12 21 8 Mirae Asset Large Cap Fund 12.7 15.8 11.8 14.4 10 3 1 1 Nippon India Large Cap Fund 7.3 14.0 8.9 11.8 26 6 10 4 PGIM India Large Cap Fund 14.5 12.2 8.2 9.4 7 16 14 16 SBI Bluechip Fund 11.6 11.7 9.5 11.4 17 21 5 5 Tata Large Cap Fund 12.1 11.8 7.8 9.9 12 20 18 13 Taurus Largecap Equity Fund 8.5 8.5 5.4 6.8 23 26 26 20 Union Largecap Fund 12.0 14 UTI Mastershare Fund 10.7 12.6 8.0 10.3 19 13 16 11 Source: AMFI, I-Sec research

Table 28: UTI mid-cap fund performance vis-à-vis peers 31st Dec 2020 Ranks

1-year 3-years 5-years 10-years 1-year 3-years 5-years 10-years Aditya Birla Sun Life Mid Cap Fund -3.7 5.4 6.4 10.1 23 20 16 16 Axis Midcap 11.3 17.8 9.8 1 1 4 Baroda Midcap -0.8 6.7 -0.4 20 16 21 BNP Paribas Midcap Fund 5.2 8.9 8.0 14.9 8 11 13 4 DSP Midcap Fund 9.2 11.1 10.4 14.5 3 7 2 6 Edelweiss Mid Cap Fund 5.2 10.5 8.6 15.1 9 8 9 3 Franklin India Prima Fund 3.5 9.4 8.7 14.6 12 10 8 5 HDFC Mid-Cap Opportunities Fund 0.2 8.0 8.2 15.8 14 13 12 1 ICICI Prudential Midcap Fund -0.6 8.2 6.9 12.2 19 12 15 13 IDBI Midcap Fund -2.5 21 Invesco India Mid Cap Fund 3.8 12.4 8.8 15.5 10 2 7 2 Kotak Emerging Equity Fund 8.9 11.2 10.5 14.4 4 5 1 7 L&T Midcap Fund -0.2 10.2 10.2 14.0 16 9 3 8 Mahindra Manulife Mid Cap Unnati Yojana 5.4 7 Motilal Oswal Midcap 30 Fund 9.7 7.8 8.9 2 15 6 Nippon India Growth Fund 6.8 11.1 8.6 10.3 5 6 10 15 PGIM India Midcap Opportunities Fund 3.6 6.0 4.8 11 18 20 Quant Mid Cap Fund -2.6 7.8 5.7 7.8 22 14 19 17 SBI Magnum Midcap Fund 0.1 3.1 5.7 12.5 15 21 18 12 Sundaram Mid Cap Fund -0.3 5.9 8.0 13.1 18 19 14 11 Tata Midcap Growth Fund 6.5 11.5 8.5 13.6 6 3 11 9 Taurus Discovery (Midcap) Fund 1.6 11.3 9.0 11.5 13 4 5 14 UTI Mid Cap Fund -0.2 6.4 5.9 13.5 17 17 17 10 Source: AMFI, I-Sec research

UTI Asset Management Company, February 5, 2021 ICICI Securities

Table 29: UTI value fund performance vis-à-vis peers 31st Dec 2020 Ranks

1-year 3-years 5-years 10-years 1-year 3-years 5-years 10-years Aditya Birla Sun Life Pure Value Fund 16.84 -6.46 7.27 6 12 12 HDFC Capital Builder Value Fund 13.97 3.30 10.72 12 7 6 ICICI Prudential Value Discovery Fund 23.55 6.50 9.89 1 2 8 IDBI Long Term Value Fund 14.11 10 IDFC Sterling Value Fund 16.45 -0.91 10.06 7 11 7 Indiabulls Value Fund 16.84 -0.39 7.63 5 10 11 JM Value Fund 14.14 4.73 13.89 9 3 1 L&T India Value Fund 15.75 2.98 11.14 8 8 4 Nippon India Value Fund 17.09 4.71 10.83 4 4 5 Quantum Long Term Equity Value Fund 13.22 4.11 9.06 9.75 13 6 9 1 Tata Equity PE Fund 14.02 4.63 13.49 11 5 2 Templeton India Value Fund 12.61 -0.18 8.73 14 9 10 Union Value Discovery Fund 18.31 3 UTI Value Opportunities Fund 19.80 9.36 11.94 2 1 3 Source: AMFI, I-Sec research

Debt Table 30: UTI short duration fund performance vis-à-vis peers 31st Dec 2020 Ranks

1-year 3-years 5-years 10-years 1-year 3-years 5-years 10-years Aditya Birla Sun Life Short Term Fund 11.8 9.4 9.3 9.3 1 5 2 1 Axis Short Term 10.9 9.4 9.1 8.6 6 3 4 4 Baroda Short Term Bond 8.3 8.6 8.9 8.4 22 13 6 9 BNP Paribas Short term Fund 10.9 8.7 8.4 8.3 5 12 14 11 BOI AXA Short Term Income Fund -0.5 -2.6 1.9 4.6 25 24 24 20 Canara Robeco Short Duration Fund 9.6 8.4 8.6 18 14 10 DSP Short-term Fund 10.2 8.9 8.6 8.4 16 11 11 10 Franklin India Short-term Income Fund -4.6 3.1 5.5 7.2 26 23 23 18 HDFC Short Term Debt Fund 11.4 9.4 8.9 9.0 3 4 5 2 HSBC Short Duration Fund 6.9 4.5 5.9 6.7 24 20 21 19 ICICI Prudential Short Term Fund 11.5 9.5 9.5 8.8 2 1 1 3 IDBI Short Term Bond 10.5 6.2 7.0 10 17 17 IDFC Bond Fund Short Term Plan 10.2 9.1 8.7 8.5 14 6 9 6 Indiabulls Short Term Fund 7.8 7.5 7.8 23 15 15 Invesco India Short Term Fund 10.4 9.0 8.5 8.2 11 9 13 12 Kotak Bond Short-term Fund 10.9 9.5 9.1 8.4 7 2 3 7 LIC MF Short Term Debt Fund 9.4 20 L&T Short Term Bond Fund 10.2 9.0 8.5 15 7 12 Mirae Asset Short Term Fund 9.5 19 Nippon India Short-term Fund 10.4 8.9 8.7 8.4 13 10 8 8 PGIM India Short Maturity Fund 8.7 5.1 6.7 7.5 21 19 18 16 Principal Short Term Debt Fund 10.8 5.4 6.6 7.4 9 18 19 17 SBI Short Term Debt Fund 10.4 9.0 8.8 8.6 12 8 7 5 Sundaram Short Term Debt Fund 9.9 4.0 5.8 7.5 17 22 22 15 Tata Short-term Bond Fund 10.8 7.0 7.5 7.9 8 16 16 13 UTI Short-term Income Fund 11.0 4.5 6.1 7.8 4 21 20 14 Source: AMFI, I-Sec research

UTI Asset Management Company, February 5, 2021 ICICI Securities

Table 31: UTI treasury fund performance vis-à-vis peers 31st Dec 2020 Ranks

1-year 3-years 5-years 10-years 1-year 3-years 5-years 10-years Aditya Birla Sun Life Low Duration Fund 8.6 8.6 8.5 8.1 5 2 2 10 Axis Treasury Advantage Fund 7.7 8.2 8.1 8.4 8 4 5 4 Baroda Treasury Advantage Fund -10.9 -8.2 -1.7 3.5 26 26 25 22 BNP Paribas Low Duration Fund 8.2 7.9 7.9 8.1 6 7 7 12 Canara Robeco Savings Fund 6.7 7.4 7.5 8.2 19 13 13 8 DSP Low Duration Fund 7.0 7.8 7.9 18 9 8 Edelweiss Low Duration Fund -2.5 0.2 3.0 4.8 25 25 24 21 Franklin India Low Duration Fund 1.9 5.4 7.0 8.2 24 19 16 9 HDFC Low Duration Fund 8.8 8.2 8.2 7.9 2 5 4 13 HSBC Low Duration Fund 4.2 3.2 5.0 22 22 21 ICICI Prudential Savings Fund 8.7 8.3 8.3 8.7 4 3 3 1 IDFC Low Duration Fund 7.2 7.7 7.8 8.5 17 11 9 2 Invesco India Treasury Advantage Fund 7.4 8.0 7.9 8.3 12 6 6 5 JM Low Duration Fund 26.9 6.2 6.8 7.9 1 17 17 14 Kotak Low Duration Fund 8.7 8.6 8.7 8.5 3 1 1 3 LIC MF Savings Fund 7.6 6.4 7.1 7.3 10 16 14 16 L&T Low Duration Fund 7.5 6.7 7.8 8.1 11 15 10 11 Mahindra Manulife Low Duration Fund 7.2 7.8 16 10 Mirae Asset Savings Fund 7.3 7.0 7.1 15 14 15 Nippon India Low Duration Fund 8.0 7.7 7.8 8.2 7 12 11 7 PGIM India Low Duration Fund 3.1 0.5 3.7 6.1 23 23 22 19 Principal Low Duration Fund 6.3 0.2 3.4 6.0 21 24 23 20 SBI Magnum Low Duration Fund 7.4 7.9 7.8 8.3 13 8 12 6 Sundaram Low Duration Fund 6.6 4.0 5.6 7.1 20 20 19 18 Tata Treasury Advantage Fund 7.7 5.9 6.7 7.8 9 18 18 15 UTI Treasury Advantage Fund 7.4 3.4 5.3 7.2 14 21 20 17 Source: AMFI, I-Sec research

Table 32: UTI corporate bond fund performance vis-à-vis peers HDFC Corporate bond fund 31st Dec 2020 Ranks 1-year 3-years 5-years 10-years 1-year 3-years 5-years 10-years Aditya Birla Sun Life Corporate Bond Fund 12.1 9.6 9.0 9.3 4 3 2 2 Axis Corporate Debt Fund 12.4 9.3 2 5 BNP Paribas Corporate Bond Fund 10.4 5.7 6.6 7.7 13 14 12 12 Canara Robeco Corporate Bond Fund 10.3 8.8 7.8 14 11 10 10 DSP Corporate Bond Fund 9.7 17 Edelweiss Corporate Bond Fund 2.8 0.7 3.2 19 15 13 13 Franklin India Corporate Debt Fund 9.7 9.2 8.5 9.3 18 8 7 7 HDFC Corporate Bond Fund 12.1 9.7 9.1 9.2 3 2 1 1 ICICI Prudential Corporate Bond Fund 10.8 9.2 8.5 10 6 6 6 IDFC Corporate Bond Fund 11.9 9.1 5 9 Invesco India Corporate Bond Fund 10.6 8.9 8.1 8.1 11 10 8 8 Kotak Corporate Bond Fund 10.0 9.2 8.6 8.7 15 7 5 5 L&T Triple Ace Bond Fund 12.8 10.6 8.9 8.2 1 1 3 3 Nippon India Corporate Bond Fund 10.0 8.5 8.0 8.5 16 13 9 9 PGIM India Premier Bond Fund 10.5 8.6 7.3 7.4 12 12 11 11 SBI Corporate Bond Fund 11.1 8 Sundaram Corporate Bond Fund 11.2 9.3 8.8 8.1 7 4 4 4 Union Corporate Bond Fund 11.0 9 UTI Corporate Bond Fund 11.3 6 Aditya Birla Sun Life Corporate Bond Fund 12.1 9.6 9.0 9.3 4 3 2 2 Source: AMFI I-Sec research

UTI Asset Management Company, February 5, 2021 ICICI Securities

Financial summary

Table 33: Profit and Loss statement (Rs mn, year ending Mar 31) FY19 FY20 FY21E FY22E FY23E AAUM ( UTI AMC) 15,91,150 15,15,126 16,11,190 18,21,920 20,71,323 UTI International 1,18,748 1,57,654 1,65,536 1,77,124 1,91,294

Revenue from operations 8,906 7,879 7,739 8,036 8,618 Other income 1,905 1,021 4,481 2,170 2,200 Total income 10,811 8,900 12,219 10,207 10,818

Operating expenses Employee expense 3,067 3,399 3,960 3,740 3,740 Other expenses 2,617 1,918 1,573 1,651 1,701 Total Opex 5,683 5,317 5,533 5,391 5,441

EBITDA ( incl other income) 5,128 3,583 6,687 4,815 5,377 EBITDA ( ex other income) 3,223 2,562 2,206 2,645 3,177 Depreciation and amortization expenses 162 170 325 341 353 PBT 4,966 3,413 6,362 4,475 5,024 Core PBT ( ex other income) 3,061 2,392 1,881 2,304 2,824

Tax 1,447 664 1,225 875 993 PAT 3,568 2,715 5,137 3,599 4,031 Core PAT 2,218 1,892 1,519 1,854 2,266 Source: Company data, I-Sec research

Table 34: Balance sheet (Rs mn, year ending Mar 31) FY19 FY20 FY21E FY22E FY23E Share Capital 1,268 1,268 1,268 1,268 1,268 Reserves and Surplus 24,891 26,455 29,405 31,565 33,643 Networth 26,158 27,723 30,673 32,833 34,911

Minority interest 372 108 108 108 108

Provisions 1,304 2,388 2,388 2,388 2,388 Other Liabilities 1,470 1,433 1,633 1,833 2,033

Total Liabilities 29,304 31,653 34,803 37,162 39,441

Assets Net block ( incl CWIP) 2,574 3,630 3,505 3,365 3,112

Investments 23,968 24,857 27,632 29,632 31,663 of which cash and cash equivalents 1,242 1,193 1,252 1,315 1,380

Loans and advances 291 379 379 379 379 Other assets 2,470 2,787 3,287 3,787 4,287

Total Assets 29,304 31,653 34,803 37,162 39,441 Source: Company data, I-Sec research

UTI Asset Management Company, February 5, 2021 ICICI Securities

Table 35: Cashflow statement (Rs mn, year ending Mar 31) FY19 FY20 FY21E FY22E FY23E Operating Cash flow ex WC 1,901 2,580 4,243 2,693 3,107 Working Capital Changes -885 -861 -300 -300 -300 Cash flow from operations 2,686 1,016 1,719 3,943 2,393 Capital Commitments ex asset sale -65 -218 -200 -200 -100 Free Cash Flow 2,720 3,224 4,343 2,793 3,307 Cash flow from Investing Activities -452 -932 -1,697 -890 -788 Dividend paid including taxes -764 -692 -888 -2,187 -1,440 Cash flow from Financing Activities -813 -836 -888 -2,187 -1,440 Chg. in Cash & Bank balance -250 -49 1,359 -685 579 Source: Company data, I-Sec research

Table 36: Key ratios (Year ending Mar 31) FY19 FY20 FY21E FY22E FY23E Per Share Data (in Rs.) EPS(Basic Recurring) 28 21 40.5 28.4 31.8 Core EPS 17 15 12 15 18 Dividend per share (DPS) 5 7 17 11 15 Book Value per share 206 219 242 259 275

Growth Ratios (%) MF AUM 5.3 -4.8 6.3 13.1 13.7 Total Revenue -7.9 -11.5 -1.8 3.8 7.2 EBITDA -12.1 -30.1 86.6 -28.0 11.7 Recurring Net Income -2.5 -23.9 89.2 -29.9 12.0 Core PAT 0.6 -14.7 -19.7 22.0 22.3

Valuation Ratios (x) P/E 20.0 26.3 13.9 19.8 17.7 P/BV 2.7 2.6 2.3 2.2 2.0 Core P/E 32.2 37.7 47.0 38.5 31.5 Mcap to AUM 4.49 4.71 4.43 3.92 3.45

Operating ratios Investment management fees/total income 82.4 88.5 63.3 78.7 79.7 Operating expenses/total income 52.6 59.7 45.3 52.8 50.3 Employee expenses/operating expenses 54.0 63.9 71.6 69.4 68.7 Core PBT margin (of total income) 28.3 26.9 15.4 22.6 26.1 PAT margin (of total income) 33.0 30.5 42.0 35.3 37.3 Tax rate 29.1 19.5 19.3 19.6 19.8 Payout ratio 18% 33% 43% 40% 48%

% of MF AUM Revenue 56.0 52.0 48.0 44.1 41.6 Operating expenses 35.7 35.1 34.3 29.6 26.3 Operating margins 20.3 16.9 13.7 14.5 15.3 PAT 22.4 17.9 31.9 19.8 19.5

Return ratios ROE 14.3 10.1 17.6 11.3 11.9 Source: Company data, I-Sec research

UTI Asset Management Company, February 5, 2021 ICICI Securities

Index of Tables and Charts

Tables Table 1: UTI assets under management as on Dec’20 ...... 3 Table 2: Non-MF AUM breakdown ...... 6 Table 3: Current AUM and key schemes details ...... 6 Table 4: Equity and Balanced funds (AUM as on Nov’20) ...... 7 Table 5: Yield projections in all scenarios ...... 10 Table 6: Base case scenario ...... 10 Table 7: Bull case scenario ...... 11 Table 8: Bear case scenario ...... 11 Table 9: Consolidated P/L ...... 13 Table 10: Standalone – P/L ...... 14 Table 11: Standalone P/L – Income / Expense % of AUM ...... 14 Table 12: UTI AMC structure ...... 15 Table 13: Key schemes of UTI retirement solutions ...... 17 Table 14: UTI Capital ...... 17 Table 15: Key managerial personnel ...... 18 Table 16: Board of director (eight independent directors; one whole-time director and two non-executive directors) ...... 18 Table 17: Committee composition ...... 19 Table 18: UTI ESOP details ...... 19 Table 19: Shareholding pattern as on 30th Dec’20 ...... 20 Table 20: Expected growth in operating profit if UTI reduces its cost structure ...... 24 Table 21: Detailed revenue breakup ...... 25 Table 22: Detailed consolidated PAT breakup ...... 25 Table 23: Brief overview of reasons for lower profits in FY20 ...... 25 Table 24: Channels of distribution for total AUM ...... 26 Table 25: Channels of distribution for equity AUM ...... 26 Table 26: UTI equity fund performance vis-à-vis peers ...... 27 Table 27: UTI master share fund performance vis-à-vis peers ...... 28 Table 28: UTI mid-cap fund performance vis-à-vis peers ...... 28 Table 29: UTI value fund performance vis-à-vis peers ...... 29 Table 30: UTI short duration fund performance vis-à-vis peers ...... 29 Table 31: UTI treasury fund performance vis-à-vis peers ...... 30 Table 32: UTI corporate bond fund performance vis-à-vis peers ...... 30 Table 33: Profit and Loss statement ...... 31 Table 34: Balance sheet ...... 31 Table 35: Cashflow statement ...... 32 Table 36: Key ratios ...... 32

Charts Chart 1: History of AUM creation ...... 3 Chart 2: UTI AUM’s total market share has seen a declining trend… ...... 4 Chart 3: …while its equity AUM market share has shown signs of stabilising ...... 4 Chart 4: Debt AUM has seen sharp loss in market share… ...... 4 Chart 5: … while liquid AUM has seen modest decline ...... 4 Chart 6: …UTI has been able to maintain market share in ‘others’ segment (which includes ETFs) ...... 4 Chart 7: Since Q1FY16, overall AUM CAGR has been 9%...... 5 Chart 8: ..Equity AUM too has clocked 12% CAGR ...... 5 Chart 9: …Debt AUM has registered sharp decline ...... 5 Chart 10: Liquid AUM CAGR has been 8% ...... 5 Chart 11: Strong growth in ETF since Q1FY16 ...... 5 Chart 12: SIP flows rose in Q3FY21 ...... 8

UTI Asset Management Company, February 5, 2021 ICICI Securities

Chart 13: Average ticket size has slightly declined ...... 8 Chart 14: SIP AUM returning to pre-Covid levels ...... 8 Chart 15: Number of SIP live folios has risen consistently ...... 8 Chart 16: SIP book tenure mix ...... 8 Chart 17: SIP market share ...... 8 Chart 18: T-30 and B-30 market share ...... 9 Chart 19: T-30 and B-30 AUM as % of total AUM ...... 9 Chart 20: UTI earns lower revenues vis-à-vis peers due to higher mix of passive funds .. 21 Chart 21: Employee cost is highest for UTI AMC ...... 21 Chart 22: Other expenses as % of AUM is also highest for UTI AMC...... 22 Chart 23: Higher costs have led to lower operating margins… ...... 22 Chart 24: …and PAT… ...... 22 Chart 25: …and core PAT (explain) ...... 23 Chart 26: RoEs have trended lower, but can improve to 14% / 11% / 11% in FY21 / FY22 / FY23 respectively ...... 23 Chart 27: Employee cost as % of AAUM ...... 24

UTI Asset Management Company, February 5, 2021 ICICI Securities

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New I-Sec investment ratings (all ratings based on absolute return; All ratings and target price refers to 12-month performance horizon, unless mentioned otherwise) BUY: >15% return; ADD: 5% to 15% return; HOLD: Negative 5% to Positive 5% return; REDUCE: Negative 5% to Negative 15% return; SELL: < negative 15% return

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