UTI AMC — Q4 FY24 earnings call

Call held 26 Apr 2024

Management summary

UTI AMC delivered a strong performance in FY24, characterized by significant AUM growth and a sharp rise in consolidated net profit, largely aided by mark-to-market gains on investments. Core profitability showed healthy momentum with a 22% QoQ increase in Core PAT. Management highlighted yield improvements across categories and a strategic focus on expanding their footprint in B30 cities and digital platforms.

Highlights

  • Consolidated Net Profit for Q4 FY24 stood at ₹163 crore, up 90% YoY but down 12% QoQ.

  • Consolidated Revenue from operations for Q4 grew 38% YoY to ₹416 crore.

  • Total Group AUM reached ₹18.48 lakh crore, a 19% increase from the previous year.

  • Consolidated Core PAT (excluding MTM gains) for Q4 was ₹96 crore, up 68% YoY and 22% QoQ.

  • Equity QAAUM for the quarter stood at ₹84,777 crore, rising 20% compared to Q4 FY23.

  • The company distributed ~100% of its FY24 profits as dividends, including a special dividend.

  • SIP AUM witnessed a significant growth of 42.95% YoY, reaching ₹30,747 crore.

  • UTI Retirement Solutions manages 25.8% of the NPS industry AUM with ₹3.03 lakh crore.

Key financials

  1. Consolidated Revenue from Operations ₹416 Cr +38%YoY
  2. Consolidated Net Profit ₹163 Cr +90%YoY
  3. Consolidated Core PAT ₹96 Cr +68%YoY
  4. Total Group AUM ₹18.48L Cr +19%YoY
  5. Equity QAAUM ₹84,777 Cr +20%YoY

What they filed

Q1 FY27: revenue up 6.8%, net profit up 15.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue538 418 376 547 419 −22%517 +24%390 +4%584 +7%
EBITDA348 233 169 340 177 −49%302 +30%-12 −107%383 +13%
Net profit263 174 102 254 132 −50%138 −21%-51 −150%294 +16%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentAUMAUM Growth
UTI Retirement Solutions Ltd.₹3.03L Cr25.7%
UTI International₹27,645 Cr27.4%
UTI Alternatives Pvt. Ltd.——

Guidance & targets

Other

  • Effective Tax Rate Other · FY25 · Medium confidence 22%-23%
    I think it should be in the range of 22%-23%.

    — Vinay Lakhotia, CFO

Margin

  • Standalone Blended Yield Benchmark Margin · Q1 FY25 · High confidence 34 bps
    But 34 bps is the right number to start at the beginning of the financial year.

    — Vinay Lakhotia, CFO

  • Equity and Hybrid Fund Yield Margin · FY25 · High confidence 76 bps
    So, almost 76 bps will be there for equity and hybrid funds. So, we start the year with the same rate.

    — Vinay Lakhotia, CFO

Headcount

  • Standalone Employee Expense Growth Headcount · FY25 · Medium confidence 2%-3%
    maybe on a standalone basis, the increase could be around 2%-3%.

    — Vinay Lakhotia, CFO

Risks & concerns

  • Redemption Pressure in Equity/Hybrid

    medium

    Analysts noted pressure on net sales and redemptions in equity categories despite gross sales of ₹2,981 crore.

    Analyst acknowledged

  • Market Volatility Impact on Fair Value

    medium

    A significant portion of FY24 profit (₹500 cr) came from fair value changes, which are subject to market fluctuations and may not be repeatable.

    Both acknowledged

  • International Yield Volatility

    low

    Yields in the international business have been volatile due to asset mix changes and redemptions in flagship funds like IDEF.

    Analyst acknowledged

Areas of evasion (1)

  • Shareholder-level stake sale progress

Q&A highlights

2 direct, 1 evasive
Levers for Yield Expansion Direct
In fourth quarter, since we are not required to pay any commission as the one-year period has already ended, that has also improved our AMC yield under the equity and hybrid category.

Explains that the yield improvement is sustainable as the mandatory one-year trail commission for B30 business mobilized before the SEBI ban has finally rolled off.

Asked by Swarnabha Mukherjee, B&K Securities

Employee Benefit Expense Spike Direct
One is the one-time expense on account of gratuity... increased by around ₹ 5.5 crore. Also, the insurance cost also has marginally gone up by ₹ 2.5 crore during this quarter.

Clarifies that the sequential jump in employee costs was largely due to one-time actuarial valuations rather than a permanent increase in the run-rate.

Asked by Swarnabha Mukherjee, B&K Securities

Rumored Stake Sale by PSU Banks Evasive
No, we don't know anything about that, and we can't offer any comments on this. This is their matter, the shareholders' matter.

Management maintains a strict boundary between company operations and shareholder-level transactions, leaving the overhang of a potential stake sale by promoter banks unresolved.

Asked by Pratham Shah, PD Exports

2 min read 5 chapters

Detailed narrative

Yield Dynamics and B30 Commission Roll-off

Management reported a notable improvement in yields across fund categories. Equity and hybrid yields improved by approximately 5 bps sequentially to ~76 bps. This was primarily driven by the cessation of the one-year additional trail commission for B30 business mobilized prior to February 2023, as mandated by SEBI. CFO Vinay Lakhotia confirmed that 34 bps is the appropriate blended yield benchmark to start FY25.

Mark-to-Market Gains Drive Profit Surge

The massive jump in consolidated net profit from ₹99 crore in FY23 to ₹500 crore in FY24 was largely attributed to net gains on fair value changes. With a consolidated investment book of ₹3,833 crore, the company benefited from a ~29% return in the NIFTY during the fiscal year. Management cautioned that while these gains significantly impact the P&L, they are market-dependent, leading to the focus on 'Core PAT' which grew 22% QoQ to ₹96 crore.

Strategic Expansion in B30 Cities and Digital Infrastructure

UTI AMC continues to leverage its strong presence in 'Beyond-30' (B30) cities, which account for 21% of its AUM and 33% of its total folios. The company opened 29 new branches in Tier-2 and Tier-3 cities during the year. Simultaneously, they consolidated all digital assets under the 'UTI HART' platform and introduced a 3-in-1 self-service digital KYC process to cater to nearly 0.6 million transactions per day.

Subsidiary Performance: Retirement and International

UTI Retirement Solutions remains a powerhouse, managing ₹3.03 lakh crore in AUM (25.8% market share of NPS) and recording a 16% YoY increase in PAT to ₹54 crore. UTI International also saw 27.4% AUM growth, reaching ₹27,645 crore. The company recently obtained a license from French regulators to operate in the European region through its Paris office, which is expected to create significant business opportunities without incurring further major expenses.

Dividend Policy and Capital Allocation

The company reaffirmed its policy of paying a minimum 50% dividend. For FY24, the payout was exceptionally high at nearly 100% of profits, including a special dividend. This reflects management's commitment to returning capital to shareholders in a year of strong mark-to-market gains, while maintaining a healthy balance sheet for future growth initiatives like the planned Multi Cap Fund launch.

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