UTIAM saw a soft quarter as core income missed PLe by 7% led by higher opex. Revenue yields were in-line at 42.2bps (PLe 42.4bps) as AMC yield was stable QoQ at 33.9bps. Equity performance in 1-yr bucket has been consistently improving since Mar’24, and 59% of equity AUM is in quartile 1 & 2 as of Mar’25. A dilution of 1-2bps is expected in yields which will be cushioned by commission rationalization carried out in Q4FY25. Staff cost is guided to grow by 3%/5% at the standalone/consol level; we envisage other opex to grow at an 11% CAGR over FY25-27E. Due to operating leverage, opex/AuM could fall from 24bps to 21bps over FY25-27E, which would translate to a core PAT CAGR of 15%. Stock is valued at 10.5x suggesting a 62% discount to NAM. We tweak multiple to 16x and TP to 1,300 as we roll forward to Mar’27 core EPS. Retain ‘BUY’.
- Soft quarter; core income miss due to higher opex/tax: Overall QAAuM came in at Rs3.41trn,(-3.6% QoQ) while equity QAAuM de-grew by 5% QoQ to Rs1.22trn. Revenue was in-line at Rs3.6bn; annualized yields declined to 42.2bps (PLe 42.4bps). Opex was a miss at Rs2.1bn (PLe Rs2.0bn); staff cost and other expenses were higher due to branch expansion. Core income at Rs1.5bn was 7% below PLe. Resulting operating yields were lower at 17.3bps (PLe 18.7bps). Other income was a miss at Rs60mn (PLe Rs200mn) due to MTM losses in UTI international. Tax rate was higher at 33.8% (PLe 23%) owing to change in DTL on account of withdrawal of indexation benefit. Core PAT was Rs980mn (20% miss to PLe). PAT was Rs1.02bn.
- AMC yields were stable QoQ: Equity share declined QoQ to 35.8% from 36.4% in Q3’25; debt/liquid share inched up by 0.8%/0.2% to 10.8%/9.8%. ETF share decreased by 0.8% QoQ to 31.3%. AMC yields were steady QoQ at 33.9bps as equity yields saw a slight uptick QoQ to ~75bps. Company rationalized commissions during Q4FY25, the impact of which will be visible Q1FY26. Equity performance in the 1-yr bucket, a lead indicator, has been consistently improving since Mar’24. As per the company, 59% of equity AUM is in quartile 1 & 2 as of Mar’25. 3-yr performance is also enhancing since Aug’24. Market share in net flows has turned positive in FY25, as against outflows for FY24.
- Opex leverage to continue led by controlled staff cost growth: Consol other opex was elevated due to i) NFO expenses ii) opening of 91 branches iii) branch renovation. Expenses in UTI International have also gone up due to expansion in Europe & USA. As per UTIAM, staff cost might increase in FY26 by 3%/5% at the standalone/consol considering wage hike of 7-8%. Capex increase in FY25 was majorly due to branch expansion and IT upgradation; these are expected to slow down in FY26. Hence in our opinion, other opex could grow at a lower pace in FY26 than FY25. However, we are conservatively factoring an 11% CAGR in other opex over FY25-27E (10% YoY growth in FY25). Tax rate is expected to normalize to 23-24%.