With positive net inflows in equity schemes for six months in a row mutual funds are back in the game. This makes it worthwhile to consider UTI AMC. The asset manager has seen strong growth in assets in past one year. Its mutual fund AUM has increased by around 40 percent year on year as of June-end, which was higher than the industry growth of 35 percent YoY during the same period.
The bigger positive is that the proportion of equity assets that earn higher fees has improved to 29 percent of AUM as of June and from 24 percent a year ago. The asset manager also garnered around Rs 2500 crore last month through NFO.
Following the good performance, the stock has moved up sharply by around 50 percent in the last three months. Despite the sharp rally, the valuation is still undemanding as the stock is currently trading at around 20 times the estimated earnings for FY23. The valuation is attractive considering the fact that return on equity has improved from 10 percent in FY20 to around 20 percent in Q1 FY22.
Moreover, UK AMC is valuation is at a significant discount to that of both HDFC AMC as well as Nippon Life, the valuation gap is likely to narrow down further and drive the stock upside. Given the sectoral tailwind, improving market share and return ratios and favourable valuation investors should consider UTI AMC.
Moneycontrol.com’s Neha Dave talks about the stock.
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(Edited by : Abhishek Jha)