UTI Asset Management Company Limited (UTIAMC) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the UTI Asset Management Company Limited Q2 and H1 FY '27 Earnings Conference Call. From the management, we have with us Mr. Vinay Lakhotia, Chief Financial Officer and Head Corporate Strategy; and Mr. Sandeep Shamsi, Head, Investor Experience and Corporate Affairs. We also have the Investor Relations team from Adfactors PR. [Operator Instructions] I now hand the conference over to Mr. Sandeep Samsi for opening remarks. Thank you, and over to you, sir.

Thank you, Farah. Good evening, everyone, and thank you for joining us today. Due to an urgent family exigency, Mr. Vetri Subramaniam, our MD and CEO, will not be able to join today's earnings call. I have Mr. Vinay Lakhotia, CFO and Head of Corporate Strategy, along with me on this call. Our financial results for the quarter and half year ended 30th September 2026 along with the investor presentation and press release have been shared on the stock exchanges as well as on our website. And we trust you had the opportunity to review them. Before we discuss our financial performance, I would like to cover 3 key areas: first, the macroeconomic environment and the broader mutual fund industry backdrop. Secondly, the progress we have made against our strategic priorities during quarter 2 of FY '27 and in the first half of the financial year. And finally, why we remain confident in U.K. MC's long-term growth trajectory and opportunities ahead. Speaking on the macroeconomic environment, the quarter 2 of FY '27, witnessed resilient domestic activity with quarter 1 GDP growth at 7.8% supported by manufacturing and services sector. However, West Asia tension and crude oil volatility, heightened inflationary pressures with retail inflation rising to 5.54% in September '26. This month, the RBI also raised the repo rate to 5.50% and projected FY '27 GDP growth at 7.1%. Despite quarter end market volatility, domestic investors' participation remained resilient. Equity-oriented scheme attracted INR 92,333 crores in quarter 2 of FY '27, taking the first half FY '27 inflows to INR 1.83 lakh crores. In September '26, the equity inflow stood at INR 38,307 crores, and while the monthly SIP contribution reached a record INR 32,490 crores, with the SIP AUM being at INR 17.86 lakh crores for the industry. Small and mid-cap funds accounted for 44% of the September equity inflow, while Flexicap multicap large and mid-cap and large-cap funds accounted another 1%. Industry quarterly average AUM rose to INR 87.2 lakh crore from INR 83.1 lakh crores in quarter 1 of FY '27 with ETF recorded net inflows of INR 15,201 crores in September '26. For UTI, the underlying message is encouraging. Even though short-term volatility is an inherent part of equity investing, the structural drivers of the mutual fund industry, including the economic growth, rising income, broader investor participation and financialization of household savings remain intact. Keeping these opportunities in mind, our focus remains on translating the industry structural growth potential into substantial growth for UTIMC and capturing a larger share of industry flows. Under our Mission 2031, we are looking to work across 5 interconnected priorities: accelerating AUM growth, strengthening our SIP franchise, expanding distribution reach, deepening digital capabilities and delivering better outcome for investors. Turning to our business performance. Our mutual fund quarterly average AUM for quarter 2 of FY '27 stood at INR 4.02 lakh crores compared with INR 3.93 lakh crores in quarter 1 of FY '27, representing a market share of 4.61%. Our total group AUM stood at INR 16.28 lakh crore as of September 30, 2026. Equity-oriented assets across active and passive strategies accounted for 72% of our average mutual fund AUM compared with approximately 70% in the previous quarter. Our SIP franchise remains resilient with a combined monthly SIP and STP inflow standing at INR 982 crores in September of '26. Our SIP AUM stood at INR 45,572 crores as of September 30, 2026, broadly stable as compared with INR 45,595 crores in June. This reinforces our focus on systematic investment as a driver of sustainable growth. The gross SIP inflows were INR 2,583 crores during this quarter and INR 5,085 crores during the half year of FY '27. Furthermore, we registered INR 5.96 lakh new SIP during quarter 2 of FY '27, of which 87% was sourced to digital channels. In quarter 2 of FY '27, our live folio base stood at INR 1.47 crores, and we added INR 3.6 lakh new investors as identified by the plan. During the half year, we added INR 6.12 lakh investors. UTI mutual fund share of industry's new SIP registration by volume stood at 4.2% in quarter 2. This is an encouraging indicator of our efforts to improve participation in new business. The next step is to build on this momentum consistently, strengthen convergence across distribution channels and digital platform and translate new investor acquisition into sustained SIP contribution and long-term partnerships. On the financial performance, on the financial front, the consolidated core revenue from the sale of service stood at INR 398 crores for quarter 2 of FY '27 compared to INR 390 crores within the corresponding quarter last year, while the core profit after tax was INR 131 crores. For H1 of FY '27, core revenue stood at INR 777 crores and for profit after tax at INR 263 crores. Our focus remains on growing the business while maintaining operating discipline and ensuring that growth translates into sustainable profitability. On strengthening investment capabilities and product propositions, the quality of our investment outcomes is highlighted to our experienced team, renewed talent base and stronger client-facing capabilities. Our proprietary framework, the [indiscernible] equities and Jim's framework for fixed income brings discipline to research, portfolio construction and risk management across market cycles. These capabilities are selected in the depth of our research and investment evaluation. During the first half of FY '27, our equity research coverage expanded to 480 companies. We evaluated 36 IPOs and participated in 6 while continuing to invest in research infrastructure and talent. These efforts deepen our understanding of business, strengthened investment decision and support better outcomes for investors over the long term. On an equity scheme performance, Several of our funds have demonstrated an improvement in performance over the last quarter, with 51% of our equity and hybrid funds ranked in quarter 1 or quartile 1 or quartile 2 on a 3-month basis as of September '26. While on our fixed income schemes, 97% of our AUM, including liquid funds were in the top 2 quartiles over a 3-month period, while 61% was in the top 2 quarters over a 1-year period reflecting performance of our fund management capabilities across different investment horizons. We broadened our product offering across active and passive strategies. During quarter 2 of FY '27, we launched the U.K. balance hybrid fund and 4 passive products linked to the Nifty500 and BSC India sector leaders indices. Our Net Index Fund and the BSE India sector leader indexed established encouraging position within their respective category. This development expand the range of products available to our investors and distributors while strengthening our capability to participate across investment needs and market segments. Going forward, the focus will be on building awareness improving product reach and ensuring that product elevation contributes meaningfully to sustainable business growth. On our additional growth engines, building diversified growth engines remains an important pillar of our long-term strategy. We have received SEBI approval for our specialized investment fund, SIP initiative and we'll be launching the U.K. classic hybrid Longshot fund in the quarter 3 of FY '27. In our alternatives business, the first investment for the late-stage private equity fund was signed, while stock crossed INR 1,000 crores. Our pension fund onboarded 169 new corporates between April '26 and October '26. And our international business continues to pursue product initiatives across markets, including the U.S., Singapore, UAE and Gift City. These initiatives broaden our opportunity set beyond the core mutual fund fates. Expanding the distribution and strengthening the digital capabilities are key to capturing a larger share of the industry growth. During the quarter 2 of FY '27, 80.30% of our mutual fund AUM was contributed by the top 30 cities, while B3 accounted for 19.7% of the AUM. We onboarded 10 new fintech partners and continued building digital infrastructure while advancing data analytics and automation to simplify investor gene, improving investor service efficiency and strengthening conversion. Our fintech partners facilitated approximately 1 lakh transactions during the quarter 2 of FY '27, and these partners have contributed 67% of the new investor acquisition. Operating efficiency remains a key to scaling our business. Process optimization generated approximately INR 4.22 crores in savings, while automation is reducing manual intervention. As we invest in talent, technology and distribution, our focus remains on improving productivity, maintaining cost discipline and tendering operating leverage. Our people remain central to our Mission 2031 initiative. We continue to invest in the organizational capability with 10,690 framing as delivered to the sales team up to September 26, while strengthening performance management and identify critical balance for development and retention. With that, I will now take you through the operational and financial performance of the company in greater detail. The financial highlights for quarter 2 and half year of FY '27 are as follows, beginning with the performance of quarter 2. On a stand-alone basis, the core income, which is the sale of service, amounted to INR 324 crores, up by 2% Y-o-Y and 5% Q-on-Q. The core profit after tax for the quarter is INR 136 crores, up by 31% Y-o-Y and 14% Q-on-Q. The profit after tax stood at INR 143 crores, down by 14% Y-o-Y and 34% Q-on-Q. On a consolidated basis, the core income, the sale of service amounted to INR 398 crores, up by 2% Y-o-Y and 5% Q-on-Q. The core profit after tax for the quarter is INR 131 crores, up by 22% Y-o-Y and 2% Q-on-Q. The profit after tax stood at INR 132 crores, up by 17% Y-o-Y and down by 55% Q-on-Q. For the half year of FY '27, the stand-alone, the core income amounted to INR 632 crores, up by 1% Y-o-Y. The core profit after tax for the half year is INR 253 crores, up by 14% Y-o-Y. The profit after tax stood at INR 361 crores, down by 5% Y-o-Y. On a consolidated basis, the core income amounted to INR 777 crores, up by 1% Y-o-Y. The core profit after tax for H1 FY '27 is INR 263 crores, up by 15% Y-o-Y. The profit after tax stood at INR 426 crores, up by 22% Y-o-Y. For UTI Pension Fund Limited, our 100% owned subsidiary UTI pension fund has recorded a year-on-year growth of approximately 10.97% in its AUM, reaching approximately INR 4.32 lakh crores as on 30 September 26 as compared to INR 3.89 lakh crores as on 30th September 2025. It currently manages approximately 24.01% of the NPS industries AUM. U.K. International, which represents our international business has an AUM of USD 1.6 billion, which is approximately INR 16,063 crores as on 30th September 2026. Our international clients are spread across more than 30 countries and are primarily institution pension insurance companies, banks and asset managers. U.K. investment is actively exploring strategic partnership opportunities with leading asset managers in key international markets, including East Asia and Latin America. As part of a broader strategy to strengthen its global distribution network, expand its international presence and enhance access to Indian investment opportunities for investors worldwide. U.K. alternatives AUM has grown to approximately INR 4,045 crores, up 52% from INR 2,669 crores as on September of '25. This AUM represents commitment for funds in the commitment period and net capital for funds in the postcommitment period. It also includes the co-investment portfolio managed by UTI alternatives. UTI [indiscernible] has crossed the INR 1,000 or milestone launched in quarter 3 of FY '26 as the fourth fund in our DOC series, the fund is planned as a INR 1,500 crores with a greenshoe option of INR 500 crores. It already has reached an AUM of INR 1,131 crores and is currently in raising and investing stage. UT alternative currently manages 6 active domestic funds across performance -- performing credit and multi-strategy teams along with 2 Gift Cities feeder funds. UTI Multi Opportunities Fund 1 has an AUM of approximately INR 1,599 crores as of September '26 and is currently in investing state. UTI multi-opportunities find 2 has a total commitment of INR 359 crores as of September and is currently raising and investing states. UTI, DOC 3 which has an AUM of INR 533.6 crores is in repayment stage. As we ended the second half of FY '27, our priorities are clear: improve participation in industry flows strengthen our SIP franchise, deepen distribution productivity, maintain competitive investment capabilities and build greater efficiency into our operations. Mission 2031 provides the direction. Our task is to translate that direction into sustained flows in AUM and inflows, strong sale profitability and better outcomes for our investors. With this, we would like to open the forum for question-and-answer session. Thank you.

[Operator Instructions] The first question is from the line of Divij Panjabi from Banyan Advisors.

I had 2 questions. First is on the net sales. Net sales in this quarter has net outflow has gone up a lot, close to INR 800 crores in equity and INR 300 crores in [indiscernible] So if you can just help us understand what has happened there, which schemes are seeing a lot of outflows. That is one. The other question is around the employee metrics, the employee base and the sales employees also has come down to some extent in quarter 2. So is this going to continue? Or is this the stable rate that is going to be there going ahead?

Yes, David, thank you for the question. On the first part, I'll answer and then I'll hand it over to Vinay for the second part on the employees. So as we have mentioned earlier, Flexicap remains still the challenge for us. While the inflows we have seen some inflows in Flexicap but there have been large outflows also in the fund. And that remains a fund, which is -- which we are focusing on. However, if we look at the last 3 months performance, we are seeing that the fund performance has shown significant improvement. And now the Flexicap fund is in the first quartile. And as we have mentioned earlier, we have also identified some of the funds which we are positioning for the brand strategy, which is neither the quality nor the value strategy. And there, 2 of our funds have shown very good performance, and they are now in the top half of the 4 quarters. So we are there in the first 2 quartile. So there, again, we have -- once the performance stabilizes over a longer period of time. We feel that all the facial fund as well as these funds, which are in the blend strategy should be able to help us see progressively better inflows.

And to answer your second question, sir, with respect to the number of employees, I think employed maybe on the world of joining it. But as far as our overall guidance number for the employee cost is that we are maintaining that for the stand-alone is close to around INR 95 crores per quarter. And for the consolidated is grow to around INR 130 crores per quarter. We are maintaining with that guidance number for the full financial year as well.

The next question is from the line of Anirudh Sharma from Ikon Investments.

Am I audible?

Yes, sir.

So I have a couple of questions. So first of all, the SIP flows across the industry remains strong. So are we seeing UTI gain any meaningful share in new SIP registrations? Or is the growth largely coming from existing investors? Also, how are the average SIB ticket size is trending?

Yes, on the good side, we have seen that we are getting a lot of new investors also, and we have improved our market share in the new SIP registration. Now our new SIP registration is about close to 4%. So that has seen an improvement. And many of these SIPs have been there with us and have seen stability. So that is the good part. The ticket size has also increased over a period of time. So if I look at my current ticket size, it's about INR 3,100 overall, has seen an improvement over a period of time.

Okay, sir. So sir, I just wanted to that I joined the call late, so I might have missed this. So sir, I just wanted to check on the AUM growth reported this quarter? And could you help us understand how much came from net inflows and how much was driven by market depreciation/

I think we have given our net sales number in a particular quarter, it close to around INR 5,720 crores that net sales number are already there. And AUM growth number on a quarterly average basis has improved from INR 3.5 lakh crores to around INR 4.2 lakh crores. yes. it close to around INR 10,000 crores of average AUM growth rate and almost around INR 5,720 crores is from net sales.

The next question is from the line of Meghna Luthra from InCred Equities. I'm sorry, Magna, your line is breaking up. You are not able to hear you clearly. No, it's not I'm sorry, Mike, no, we are not able to hear you at all. Could you please return to the question queue? We'll move on to the next question from the line of Lalit Mohan from Equirus Securities.

Sir, just 2 questions. Firstly, on the systematic book flows of around INR 980 crores. Could you just caritatively qualitativelyindicate like what would be the concentration of top 2 or 3 schemes in that folio in that flows? And how it has trended over the [indiscernible] and secondly, like in terms of the net outflows which you are seeing. So could you just also describe -- give us some indication from a channel wise perspective, like which are the areas where we are seeing some improvement over there?

Yes, sure. So if you look at the SIP book that we have. In fact, Flexicap remains one of the largest contributor to the book. So nearly 20% of our inflows are coming still in Flexicap and that has remained broadly at around the same level last year from last year also. Last year, it was about 19.3%. Now it is about 20.3%. So apart from that, we have funds like the sectoral and thematic funds, which are contributing 16%. The mid-cap also contributed 15%. -- large and mid cap contributed 12.7%. So all of these funds are contributing on a regular basis. These are some of the larger contributors.

And channel-wide perspective here?

Yes. Channel line perspective, we are seeing on the equity side, redemptions are coming from banks as well as from the national distributors. There are some redemptions, which are also seen from the but banks and the nasal distributors we are seeing higher amount of redemption in the -- on the equity side.

Sure, sir. And sir, could you spend out the segment price yield for this quarter?

So equity is roughly at around 374 basis points equity and hybrid funds, ETF index funds will be an 8 basis point cash and EBITDA, 11% and fixed income fund is around 20, 21 basis point.

The next question is from the line of Mohit Mangal from Centrum.

My first question is towards the UT International. I understand the macroeconomic conditions are not that good. and our kind of revenue from that division has kind of remained flattish sequentially. Just wanted to know, are we launching any new schemes? Or what is our strategy for that particular division?

So once we are launching a few products in -- by the end of quarter 3 and quarter 4. Hopefully, that should provide some traction of AUM and revenue growth in UT International side. But definitely, you will hear either by the end of quarter 3 or quarter 4, there are 2 new fund launches on the duty International side.

Okay. Understood. That's helpful. Sir, secondly, you said that you'll be launching a new FIS fund. Just wanted to know, I mean, what are our plans for the next 2 to 3 years in terms of SIP any particular strategy or target in terms of AUM?

Yes. So the first one that we are planning to launch in quarter 3 is the hybrid long-short fund and there are 5 or 6 strategies, which have been allowed by the regulator. So depending on the market condition and situation, we'll look to launch funds. As of now, if you see in the industry, most of the funds which have been launched on the hybrid side and there are 1 or 2 which are on the equity side. So we are also beginning with the hybrid side. And once we assess the demand and how people are looking at the SIP funds, we can decide over the next 1 or 2 years, what kind of products we want to launch.

Understood. One data keeping question in terms of SIP gross sales, if you can give for the quarter?

Yes, sure. Gross sales in this quarter were INR 2,583 crores.

The next question is from the line of Shreyas Pimple from Nomura.

Hi, good afternoon, and thank you for the opportunity. My first question was on the yield part. We have seen a sequential increase in the lowering...

Can you be a bit louder, please?

Is it better?

Yes.

Yes. So my first question was on the yields. We have seen a sequential increase in revenue yields in this quarter. Can you highlight the reason behind that?

Some repricing basis or the BTR thing we have carried out. So I don't think there's any sequential increase in the yield number, the number are more or less at a weighted average level is flat at around 31 basis points. Marginal could be there because of the repricing fund.