UTI AMC Aims To Bolster Mutual Fund Business In Top 30 Cities, Push Active Plans
UTI Asset Management Co., which launched its three-day initial public offering on Sept. 29, aims to sell more actively managed mutual fund schemes to improve profitability.
The profitability will come from active fund management—focusing on outperforming the market compared to a certain benchmark—and “we have all levers in place to go and capture the profitable assets from the market. That’s our focus area”, Imtaiyazur Rahman, chief executive officer and whole-time director at the fund house, which managed nearly Rs 1.34 lakh crore assets in the quarter ended June, told BloombergQuint in an interview.
The asset manager, in its red herring prospectus, said it’s witnessing a shift in customer preferences to passive equity funds—mimics investment holding holdings of a particular index to achieve similar returns. That, according to the company, may adversely impact income and profitability as fees received for passive funds, accounting for nearly Rs 24,500 crore, or 18.3% of its average quarterly AUM in the quarter ended June 2020, are generally lower than that for active funds.
Besides, UTI AMC plans to aggressively expand its presence in the top 30 cities, further aiding profitability.
The company, according to the prospectus, has a significant national footprint, with a sizeable presence in “B30 cities”, or cities beyond the top 30 for mutual funds. Nearly a quarter of the company’s quarterly average assets under management comes from such cities. That’s the highest share among India’s top 10 asset managers.
“It is my belief that going forward on a directional basis our implied cost will reduce because of old employees retiring. On administrative costs, we have plans in place to reduce and improve it,” said Rahman.
Also Read: UTI AMC IPO: Here’s What You Need To Know
UTI AMC’s IPO will close for subscription on Oct. 1. The issue, comprising an offer-for-sale by existing shareholders, aims to fetch up to Rs 2,160 crore at the upper end of the price band of Rs 552-554 apiece. The company, according to an exchange filing, raised Rs 644 crore from anchor investors ahead of the opening of the issue.