Key highlights of Q2 FY21 performance
- Revenue - Management Fees was at Rs.1,993 mn, a decline of 2% yoy but a jump of 25% qoq. Qoq improvement was on the back of 4bps increase in revenue yield to 0.51% and increase in AUM by 16%.
- Operating Profit - Operating profit came at Rs. 705mn down 19% yoy mainly led by 31% yoy jump in employee costs (appears to be one offs in Q2 FY20 - will seek clarity in conference call). Other expenses, however, saw a sharp decline of 19% yoy.
- Other Income - Other income came in at Rs. 877mn because of improved equity market performance and 80% higher on yoy basis.
- Profits - PAT stood at Rs. 1,186mn was lower by 12% yoy owing to lower operating profit and higher tax payout. Sequentially PAT was higher by 16%.
- Valuations - The stock currently trades at 14x annualized H1 FY21 earnings.
Outlook and AUM
- 24% of AUM coming from B30 cities with market share of 8.6%
- Focus on growing PMS, Alternate assets and Retirement solutions along with MF business.
- Debt - 4-3 of the flagship funds had applied exit load and paid no distribution expense due to credit crisis issues. From June removed exit load and have started mobilization, in Q2FY21 received fresh flows of Rs.1,640cr in these funds. Positive on gaining Market share in high yield Fixed income category.
- Shall launch more funds in AIF post gaining some experience and the same will not require much of new investment.
- Yields - Additional bps charged in B30 cities have arrangement of 60-40% or 50- 50% with distributors
- All branches are operational as on Sept 20.
- Distribution mix of Equity AUM - IFA 60%, Bank and National 10% and Direct is 30%
- Presence across all platforms including Fintech. Traction across all categories in distribution has been good
- Revisiting business development to have relationship with banks like HDFC, BOB, PNB, Axis and all.
- Own channel for Institutional clients and using Banca channel for HNI clients.
- Good relationship with IFAs and shall help to gain market share.
- The charge of exit load was absorbed by the company.
- 50-75% of TER is paid has distribution expense.
- Most schemes have AUM of below Rs. 100cr providing some advantage to charge higher TER.
- During H1FY21 accounted for ESOP expense amounting to Rs.17.66cr
- Large number of employees retiring with the time shall help reducing employee expenses and also evaluating measures to improve employee productivity.
- Over 4 years 250 employees to retire leading to saving of Rs. 70crs and most of them will not be replaced. Few employees who needs replacement will be replaced with low cost employees. Post which, annual savings would be about 10-15% of employee costs.
- Increase AUM will help reduce the employee cost as %, focus on high yield category along with rationalization of employees to aid operating leverage.
- Initiatives across all cost items like green initiative, rent negotiated (1.5-2cr saved in H1) helping to reduce overall expense.
- Quarterly run rate of Rs.37 crs in admin expenses is expected to be sustainable
- Dividend Policy - Minimum 50% of PAT
- PNB has lock-in of 1year.
- Total Income - UTI AMC - Rs. 450cr, Retirement solutions - Rs. 8crs, UTI Capital - Rs. 5crs, UTI venture - Rs.8lac, UTI International - Rs.98 cr