Dealers in unlisted shares have seen an increase in the number of calls they get for trades in UTI Asset Management Company shares. The asset manager has just got a regulatory nod for selling shares to the public for the first time.
The price at which shares are changing hands has also moved up, in anticipation of this initial public offer (IPO) but there is also an air of caution among those dealing in the stock because of current market conditions, according to dealers in the unlisted space.
A Kolkata-based dealer said that there has been an increase in price. The increase in percentage terms though, has been in single-digit since the markets have been volatile. Companies have been circumspect about going through with their initial public offers because of the Covid-19 crisis and attendant market volatility. A Mumbai-based dealer said that there had been ten calls soon after the day began with enquiries about UTI. Buyers are unwilling to pay a premium for the shares, said the person.
Two listed asset managers Nippon Life India Asset Management (up 8.8 per cent on Tuesday) and HDFC Asset Management Company (up 2.2 per cent) have given returns broadly in line with benchmark Nifty 50 index in 2020. This is despite the mutual fund industry seeing troubles in its fixed income segment leading to losses on debt paper and the winding up of several schemes.
Dhirendra Kumar, chief executive officer of fund tracker Value Research noted that UTI has been affected by ownership issues, taking years for example, to appoint a chief executive officer. The mutual fund lists four government shareholders including State Bank of India, Life Insurance Corporation of India, Punjab National Bank and Bank of Baroda. Global asset management company T. Rowe Price Group also holds stake in the company. Making UTI a listed company may help address ownership issues, though it will need work, according to him. Just the public issue itself has been talked about for a long time, he pointed out.
“It has been in the pipeline for (over) ten years,” Kumar said.
The company reportedly plans to sell shares worth Rs 3,000 crore. The regulatory documents show that shares have also previously been allotted to employees. Employees often sell shares in unlisted companies ahead of an IPO.
Analysts believe well-known companies may consolidate their position during bad times. A 16th June PhillipCapital Asset Management Companies research report noted that the market share of the top ten players had risen to 57 per cent, up six percentage points over the last decade.
“As players with strong brand equity and brand recall tend to gain market share in tougher times, consolidation of assets within top few players will continue for some time, we reckon,” said the report authored by research analysts Sujal Kumar and Manish Agarwalla.
The mutual fund assets under management (AUM) is likely to increase at a rate of 13 per cent every year between financial year 2020 (FY20) to FY23, according to Reliance Securities research analyst Binod Modi and senior research associate D. Vijiya Rao in their 22nd June Asset Management Companies report.
“...growth in AUM with favourable asset-mix and continued focus on improving operating efficiency make a case in favour of sustainable earnings growth,” it said.