UTI AMC has just about filed the draft red herring prospectus (DRHP) for its IPO but it was anticipated. Like in case of other AMCs, the IPO of UTI AMC will be structured as an offer-for-sale, wherein the existing shareholders of UTI will get partial or total exit. Apart from SBI, LIC, BOB and PNB; T Rowe Price will also be monetizing part of its stake in UTI AMC through the IPO route. How exactly will UTI AMC stack up against competition?

First and foremost, if you look recent flows, then UTI has been losing out on AUM. It is also losing market share slowly. If you look back in history, UTI marked the arrival of mutual funds in India. Launched in 1963, UTI had been a market leader till the late 1990s. Post the default on assured return scheme, US-64, UTI began to gradually lose market share to other players like HDFC AMC, ICICI Pru AMC, and Reliance AMC etc. Currently, UTI ranks seventh in terms of AUM after HDFC AMC, ICICI Pru AMC, SBI MF, Birla MF, Nippon MF and Kotak MF. With an AUM of Rs.160,000 crore, UTI is nearly half of the 3 largest AMCs in India. Its equity AUM has also not grown in a very meaningful way over the last few years. To that extent, there would be limited visibility that UTI could get in terms of valuation metrics. The larger funds have created strong bancassurance merits, an incomparable network combined with a low cost model for client accretion. That is where UTI has been struggling to expand its AUM. Unless the equity AUM builds up in a big way, UTI AMC would really struggle to get good valuations.