distributors command a majority of the surplus made in the AMC business. Further, increasing competition and proactive policy changes by the regulator may put pressure on management fees in the AMC business in future. CRISIL believes that more pro-activeness on part of the management will be critical to capture emerging opportunities in the fast changing asset management businesses like domestic portfolio management services and private equity.
The choice of the pre-IPO strategic investors, their role in UTI AMC's management and the utilisation of proceeds garnered through private placement can have a material impact on the company's business profile.
About the company and the issue
UTI Asset Management Company Ltd. (UTI AMC) was formed as a result of the bifurcation of the erstwhile Unit Trust of India into two entities in October 2002. UTI AMC, in its new form, commenced operations with effect from February 1, 2003. Four government-owned sponsors - State Bank of India, LIC, Punjab National Bank, and Bank of Baroda - took equal stakes in the UTI AMC. Subsequent to the IPO the sponsors would still hold majority stake of about 54 per cent.
UTI AMC is one of the largest players in Indian mutual fund industry, with a market share of around 10.3 per cent as of December 2007. UTI AMC has 8.1 million retail investors spread across 455 cities accounting for 51.2 percent of the total domestic AUM.
The company also offers PMS to its clients. As of September 2007, UTI AMC's PMS business had around 320 clients and assets under management (AUM) amounting to Rs 21,609 million.
In addition, UTI AMC has three wholly-owned subsidiaries:
UTI Venture Funds Management Company Pvt. Ltd (UTIVF), which has till date launched 2 funds with total committed corpus of about Rs 8,535 million
UTI International Limited (UTIIL), which markets UTI AMC's domestic funds overseas and manages the assets and services investors of its offshore funds. As of September 2007, the total AUM of overseas funds was Rs 17,840 million
UTI Retirement Solutions Ltd. that has been floated to manage the assets of Pension Fund Regulatory Development Authority
In 2006-07, UTI AMC reported a net profit of Rs 1,529 million on a turnover of Rs 4,096 million. This is as against net profit and revenues of Rs 1,747 million and Rs 3,921 million respectively in 2005-06.
UTI AMC aims to raise Rs.23 billion to Rs.24 billion by this proposed offer for sale of 48,500,000 equity shares.
1 SUUTI was formed subsequent to the bifurcation of the erstwhile UTI into two separate entities. It is vested with the assets of UTI's US-64 and assured return funds, while UTI AMC manages all SEBI-compliant schemes. UTI AMC provides support services such as fund administration, accounting, and investor services to SUUTI.
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