UTI Asset Management Company (AMC), the second-largest asset management company in terms of total AUM and eighth-largest AMC in quarterly AUM, is set to hit the primary market on September 29. The company has fixed a price band of Rs 552-554 per share for its initial public offering (IPO), which will open for public subscription on September 29. The public offer will close on October 1.

This will be the third AMC to get listed on the stock exchanges after Nippon Life India Asset Management (NAM) and HDFC AMC. The bidding for anchor investors would open on September 28.

Here are the top things you should know before subscribing the issue:

About the issue

The IPO comprises sale of 3,89,87,081 equity shares, or 30.75 per cent, stake by existing shareholders. State Bank of India (SBI), Life Insurance Corporation (LIC) and Bank of Baroda are offering to sell 1,04,59,949 shares each, while Punjab National Bank (PNB) and T Rowe Price International are going to offload 38,03,617 shares each.

At present, SBI, LIC, PNB and Bank of Baroda hold 18.24 per cent stake each in UTI AMC. The US-based T Rowe Price owns 26 per cent stake in the company. The company has also reserved 2 lakh equity shares for its eligible employees.

Price band and fundraising
The company has fixed a price band of Rs 552-554 a share for its upcoming public offer. At the upper end of the price band, the IPO would fetch Rs 2,160 crore.

Book running lead managers
SBI Capital Markets, Kotak Mahindra Capital, Citigroup Global Markets, Axis Capital, ICICI Securities and JM Financial are the book running lead managers to the offer.

Minimum lot size
Investors can subscribe to the IPO by betting for a lot of 27 shares or in multiples thereof. This means that one will have to shell out at least Rs 14,904 to bid for the issue.

Objective of the issue
The objects of the IPO are to achieve the benefits of listing the equity shares on the stock exchanges and to carry out the sale of equity shares offered for sale by the promoters. In addition, the listing of the company’s equity shares will enhance visibility and brand name among existing and potential customers.

Valuations and brokerages’ take
Valuations of UTI AMC look attractive to Emkay Global Financial Services. It believes that at the current price band, UTI AMC has priced its IPO at around 4.6 per cent of total FY20 AUM (around 26 times Price/FY20 earnings) with around 10 per cent FY20 RoE. Peer comparisons are NAM India which is trading at 7.4 per cent of FY20 AUM (37.3x P/FY20 earnings) and HDFC AMC which is trading at 8.2 per cent of FY20 AUM (37.5x P/FY20 earnings).

“Considering relatively weaker return ratios and unfavourable AUM mix, UTI AMC is expected to be at a discount to its peers. Hence, the valuation discount by UTI AMC IPO is justified and remains attractive considering the gradual improvement in cost parameters,” Emkay said.

On the other hand, Nirmal Bang Securities said the IPO pricing is undemanding given the valuation HDFC AMC and Nippon AMC are currently commanding.

Financials

UTI AMC posted 20.52 per cent year-on-year fall in consolidated profit after tax at Rs 27.65 crore for the financial year ended March 2020. The figure stood at Rs 34.79 crore, 40.70 crore and Rs 39.52 crore in FY19, FY18 and FY17, respectively. On the other hand, return on equity of the company stood at 10.30 per cent, 14 per cent and 18.40 per cent in FY20, FY19 and FY18, respectively.

Tentative listing date
Shares of the company are proposed to be listed on both BSE and NSE. The finalisation of the basis of allotment will likely be by October 7 and the initialisation of refunds will likely be by October 8. Meanwhile, credit of shares in the demat account is likely to happen by October 9. Later, shares of the company are expected to be listed on October 12.

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