UTI AMC

UTI AMC faced notable yield compression across several categories this quarter. The ETF yield dropped from 7 bps to 4 bps following a revised bid for the EPFO mandate, where UTI secured a 23.5% share of incremental flows. Hybrid yields also softened from 90 bps to 84 bps, primarily due to the mobilization costs of the new Balanced Advantage Fund NFO, which carries a lower initial yield of 30-35 bps. Income fund yields fell by 4 bps QoQ as significant inflows moved into shorter-duration products with lower management fees.

Management acknowledged a decline in equity market share, attributing it to a 'growth' investment style that underperformed in a 'value' tilted market. To counter this, the company is repositioning 5-6 key schemes, including Hybrid Equity, Core Equity, and Equity Saving funds, which are currently performing well. They aim to leverage these 'flanking products' to claw back market share from competitors who benefited from high equity AUM appreciation during the market rally.

The company is significantly expanding its reach, particularly in 'Beyond 30' (B30) locations. On September 29, 2023, UTI inaugurated 29 new offices, bringing its total Financial Centres to 195, with 134 located in B30 cities. This physical expansion is complemented by a digital strategy that included re-launching mobile apps for investors and partners. Despite this expansion, management expects overall OpEx growth to be contained at 4-5% for the year by leveraging existing employees.

UTI Retirement Solutions remains a standout performer, managing ₹2.7 lakh crore (26.4% of NPS AUM) with a 24% YoY growth. On the international front, UTI has opened an office in Paris and received SEBI approval to start US operations, which are expected to commence by March 2024. While international AUM saw marginal declines due to redemptions in the IDEF category, management remains optimistic about global interest in Indian exposure.