India’s oldest asset manager posted another quarter of shrinking market share. So why did analysts upgrade?
UTI Asset Management’s third quarter was a study in contradictions. Reported profit crashed 20% year-on-year to Rs 1.2 billion, but beat Centrum’s estimate of Rs 1.1 billion. Strip out one-time charges, and core profit collapsed 69% to just Rs 428 million.
The culprit? “Operating expenses rose sharply by 75% YoY to Rs 3.2 billion, largely driven by one-off charges of Rs 1.1 billion related to the VRS and implementation of the new labour code,” Centrum notes. Remove those exceptional items and opex grew a more palatable 16%.
Revenue told a different story. “Core revenue grew 5% YoY to Rs 4 billion, while the MF yields (calc.) declined marginally to ~32bps,” according to Centrum. Yes Securities calculated yields slightly higher at 40 basis points, “down -3bps YoY and -1bp QoQ.” Either way, the takeaway is the same: UTI is making slightly less money on each rupee it manages, but the decline is orderly.
The Flows
Flows remained mixed in Q3, with equity and hybrid (combined) reporting net outflows of Rs 2.2 billion,” Centrum reports. Break that down and you get “equity net outflows of Rs 3.0 billion, partially offset by hybrid net inflows of Rs 0.8 billion.”
Yes Securities says: “The net flows into equity and hybrid segment have decreased from Rs 10.26 bn in 3QFY25 and Rs 5.37bn in 2QFY26 to Rs -2.21 bn (net outflows) in 3QFY26.”
What saved the quarter? Passive funds. “Total net inflows of Rs 59 billion during the quarter were driven by strong ETF and index fund inflows of Rs 65 billion,” says Centrum. Yes Securities confirms total net flows of “Rs 58.59 bn” were essentially all index money.
For the nine months through December, the picture improves marginally. Centrum notes “equity and hybrid (combined) turned positive with net inflows of Rs 8 billion, even as overall net inflows stood at a healthy Rs 215 billion.” But dig into those numbers and “ETF and index funds continued to dominate flows, contributing Rs 149 billion of net inflows.”
The Market Share Issue
The assets under management grew, but not fast enough. “AMC’s QAAUM grew 12% YoY to Rs 3.9 trillion at end Dec’25,” Centrum reports. Sounds reasonable until you consider the overall industry probably grew faster.
The evidence is in the market share data. “The decline in market share persists, with contraction of 28bps YoY and 5bps QoQ on overall basis. The equity segment saw its market share decline by 32bps YoY and 9bps QoQ, while the hybrid category fell 35bps YoY and 14bps QoQ,” according to Centrum.
Yes Securities notes “the share of Equity QAAUM at 25.7% was down by -64bps QoQ while Hybrid QAAUM share was down by -22bps sequentially.” That’s share of UTI’s own AUM mix, not industry share, but it points to the same problem: equity is shrinking as a proportion of the business.
The one bright spot? SIPs are holding up. “Gross inflows mobilised through SIPs stood at Rs 23.9 billion, with SIP AUM rising by 17% YoY to Rs 448 billion,” says Centrum. Yes Securities confirms “Gross SIP flows have grown 2.1% QoQ and 8.4% YoY. SIP AUM at Rs 448 bn was up 5.9% QoQ and 16.6% YoY.”
The Earnings Outlook
Centrum expects the pain to continue before improvement. “We have built in a 13% YoY decline in PAT for FY26, with a recovery expected from FY27 onwards.” Over the next three years, “we estimate PAT to grow at an 8% CAGR to Rs 10.2 billion, while core PAT is projected to compound at 10% CAGR to Rs 6.5 billion.”
That core versus reported PAT distinction matters. The 10% core earnings growth assumes the business itself improves, while the 8% overall growth factors in one-time charges dragging down FY26 numbers.
Asset growth projections are more optimistic. “We make minor tweaks and expect QAAUM to grow at a 13% CAGR over FY25-FY28E, reaching Rs 4.9 trillion (previously Rs 4.8 trillion),”
Ncvertheless, Centrum clearly thinks the 23% stock decline has priced in too much bad news. Yes Securities is less enthusiastic but still sees 14% upside to its Rs 1,200 target. Both seem to agree the fundamentals are mediocre but the price is reasonable.
The Valuation Call
So hence the upgrade on the stock.
Centrum is upbeat: “The ~23% correction over the past three months appears overdone. Due to attractive valuation, we upgrade the stock to BUY from NEUTRAL.” The firm values UTI at 18 times FY28 earnings, “~8% discount to its long-term mean,” implying a target price of Rs 1,278, up from Rs 1,235 previously.
Current trading level? “The stock currently trades at 15x on FY28E EPS,” Centrum notes. That’s the entire thesis in one sentence: you are getting a 20% discount to what the brokerage thinks is already a below-average multiple.
Yes Securities is slightly more generous on valuation but more cautious on the call. “We maintain an ADD rating on UTI with a revised price target of Rs 1200: We value UTI at 19x FY27 P/E for and FY25-28E EPS CAGR of 9%.”
