ICICI Securities has reiterated its 'Buy' rating on UTI Asset Management Company with a target price of Rs 992. The brokerage remains positive due to the company's disciplined cost management, though it flags concerns over declining market share and losses in subsidiaries.
ICICI Securities has reiterated its 'Buy' rating on UTI Asset Management Company (UTI AMC), assigning a target price of Rs 992. This decision comes as the brokerage evaluates the asset manager's ability to balance its internal costs against a difficult competitive environment.
The primary reason for the positive outlook is the company’s focus on keeping operating expenses under control. Between FY22 and FY26, the company managed a standalone annual growth in operating expenses of roughly 5.9%, even after adjusting for specific items like voluntary retirement schemes. This disciplined spending suggests that the company is trying to protect its profit margins despite a challenging market.
However, the brokerage report also highlights clear risks that investors should consider. UTI AMC has faced a dip in its market share, with equity assets under management falling by 6 basis points in the second quarter of FY27. Additionally, inflows from Systematic Investment Plans (SIP) and Systematic Transfer Plans (STP)—which are vital for steady growth in the mutual fund sector—dropped by 3 basis points during the same period. These declines indicate that the company is facing stiff competition and may be losing some momentum in attracting retail investors.
Another point of concern is the performance of the company’s subsidiaries. These units reported a profit before tax of Rs 92 million in FY26, but the situation reversed in the first half of FY27, where they recorded a loss of Rs 26 million. Financial health in these subsidiaries is important, as poor results here can hurt the company's overall consolidated earnings.
Looking at valuation, the stock is currently trading at approximately 11 times its estimated core profit for FY28. In the second quarter of FY27, the company reported a standalone profit of Rs 143 crore on an operating revenue of Rs 337 crore. Looking ahead, investors may want to monitor whether the company can turn around the performance of its subsidiaries and stop the slide in its market share, as these factors will be crucial for meeting the brokerage's growth estimates.