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UTI ASSET MANAGEMENT COMPANY LIMITED

FINANCIAL STATEMENTS OF SUBSIDIARY COMPANIES

CONSOLIDATED FINANCIAL STATEMENTS OF UTI ASSET MANAGEMENT COMPANY LIMITED

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CEO’S MESSAGE

“For us, a significant development during 2020-21 was the high share of our gross sales under Equity Funds. This was visible in incremental market share.”

“Going forward, we are focussed on delivering consistent growth in terms of revenue, profitability, market share, and fund performance with emphasis on high-yielding products – like equity and fixed income.”

Dear Shareholders,

It gives me immense pleasure to present our Company’s first Annual Report after its public offer and listing on the Stock Exchanges. The listing was a momentous occasion in the illustrious history of UTI and I would like to take this opportunity to thank the Government of India, SEBI and the Shareholders for their support in the successful completion of the IPO.

The past year was undoubtedly challenging in many ways. We witnessed several developments that affected business and the macroeconomic environment across countries. The shared experience of combating the Covid-19 induced pandemic has strengthened multilateralism in global trade relations. Despite the uncertainties around renewed waves and new variants of the virus, the International Monetary Fund (IMF) expects the global economy to grow by 6% in 2021, up by 30 bps relative to their previous forecast. With the pandemic emerging as a critical risk during March 2020, the major benchmark indices viz. SENSEX and Nifty50 fell to 29,468 and 8,597, respectively, as on 31 March 2020. The Equity and Hybrid category funds saw significant erosion in the market value due to correction in the equity market. The financial year 2020-21 began amidst challenges but ended with optimism. The BSE Sensex hit a record high during 2020-21 on 16 February 2021 to cross the 52,000 mark – a testimony to the confidence of investors in India’s growth story. The economic initiatives and welfare measures of the Government of India along with large scale vaccination programmes also helped in boosting investor sentiments.

Journey of MF industry and UTI AMC

The Indian MF industry, recorded a healthy 18% CAGR for the decade, registering more than five-fold growth in AUM from INR 5,92,250 crore as on 31March 2011 to INR 31,42,764 crore as on 31March 2021. For the year 2020- 21 itself, the industry grew by 41%, along with increasing geographical spread and broadening of the investor base.

For us, a significant development during 2020-21 was the high share of our gross sales under Equity Funds. This was visible in incremental market share, even though it was impacted by net outflow for the industry and also maturity of closed-ended schemes. During the year, UTI Mutual Fund added 5.52 lakh new SIP accounts, a jump of over 62% compared to the previous year.

Overall, we witnessed good equity performance, stabilisation and turnaround in Income Fund performance, regained lost market share, added investor folios, expanded distribution through banks, fintech, and increased digital onboarding.

I am happy to inform you that we have continued to focus on the smaller cities and towns of the country. As a result, as of March 2021, 23% of our total MAAUM (Monthly Average Assets Under Management) came from B-30 cities compared to 16% for the industry. We will continue to maintain our focus in these cities.

Our Group companies

Our AUM, other than domestic mutual funds, reported growth of 18% Y-o-Y, amounting to INR 9.78 lakh crore as on 31 March 2021 as compared to INR 8.28 lakh crore as of 31 March 2020. The growth was led by UTI International (70% Y-o-Y ), which looks after the offshore business of UTI AMC. UTI International, with its offices in Singapore, London, and Dubai, has investors spread across 35 countries and is mainly focussed on investors in Asia, Europe and Middle East. During the year, the International business saw significant development, growing by ~70% to USD 3.65 Billion in March 2021 from USD 2.09 Billion in March 2020. The growth has mainly come in our India Dynamic Equity Fund, which has crossed an AUM of USD 820 Million and is the 10th largest Indian fund amongst UCITS funds and J Safra Sarasin Responsible India Fund which has mobilised USD 125 Million in 6 months and is most likely Europe’s first ESG compliant India fund. Given our track record and relationships with investors and distributors, we are confident of substantial growth in this business.

UTI RSL, manages the pension assets under the NPS of the PFRDA. It has a market share of 28.75% in the NPS. During the last one year, we have recorded strong growth of 36% in the business with the AUM growing to INR 1,66,210 crore from INR 1,22,201 crore.

UTI Capital Private Ltd. is focussed on growing the private capital investment management business of UTI AMC. During the year, backed by the success of the UTI Structured Debt Opportunities Fund I, we launched UTI Structured Debt Opportunities Fund II in the month of September 2020. Alternative Investment Funds (AIF) business in India is still in the growth phase and we feel that with our strong capability in AIFs, we will be able to substantially grow this business.

Momentum in digitalisation

It was a year when business houses realised the criticality of digitalisation and the need to adapt to remote ways of transacting. At UTI AMC, we could transition rapidly since we have been implementing a comprehensive digital transformation programme to build our organisation’s efficacy, capacity, resilience and cost-effectiveness. We took multiple initiatives with respect to application modernisation, hybrid cloud architecture adoption, business process digitalisation, enterprise data platform adoption and cybersecurity enhancement. We also have a Board level Digital Transformation Committee.

We realise that data analytics and our enterprise data platform will enhance our customers’ experience further, thereby increasing customer loyalty and retention. With a strong digital framework, we are deploying our resources to capture growth from the digital strategy. Our information security policies help us to ensure the confidentiality, integrity and availability of information adequately.

We implemented the next generation front-end trading system, Bloomberg Asset and Investment Manager. The new state-of-the-art trading system will help us improve our trade execution by providing a more responsive, agile and efficient interface for our dealing operations, with simplified risk and compliance monitoring. This will also help us reduce our tracking error and costs.

Highlights of performance in 2020-21

AUM and Market Share

In terms of the AUM growth across MFs, PMS and Advisory services, we witnessed a healthy growth to touch INR 11.61 lakh crore, compared to INR 9.80 lakh crore recorded in the corresponding period last year. In our Mutual Fund QAAUM, we registered a growth of 20.7% compared to the industry growth of 18.8%. As of 31 March 2021, we recorded a AUM of INR 7.84 lakh crore under PMS, INR 1.66 lakh crore under Retirement Solutions, INR 1,576 crore under UTI Capital, and INR 26,822 crore under UTI International.

Within domestic mutual funds, AUM for the quarter in respect of Equity Funds, including ETFs/Index funds, increased by 46% Q-o-Q to INR 93,331crore as on 31 March 2021. This was primarily driven by passive equity funds (69% Q-o-Q increase in Quarterly Average AUM as on 31 March 2021). Overall, this performance resulted in the gain of market share from 5.56% to 5.69% during the Q4 of 2020-21. UTI Mutual Fund captured 6% of the overall industry net inflow.

Operational highlights

Our brand recognition and goodwill among our investors and partners assisted in the following operational developments during the year:

  • We manage 138 (excluding 10 segregated portfolio) domestic mutual fund schemes, comprising Equity, Balanced/Hybrid, Income, ETFs/Index, Liquid and Money Market Funds as of 31 March 2021.
  • With ~23% of our AUM, we continue to have a high concentration of MAAUM in B30 markets.
  • As of 31 March 2021, our distribution network included - 163 UTI Financial Centres (UFCs), 278 Business Development Associates (BDAs) and Chief Agents (CAs) and 39 Official Points of Acceptance (OPAs). Apart from this, we have partnered with approximately 56,600 Mutual Fund Distributors (MFDs), PSU & Private Banks, National & Regional Distributors and fintechs.
  • As of 31 March 2021, UTI MF offered 138 Schemes/ Plans (excluding 10 segregated portfolios), out of which 24 were Equity Funds; 98 were Debt Funds; 1 Liquid Fund; 9 were ETFs/Index Funds, and 6 were Hybrid Funds.
  • Our Monthly Gross SIP inflow increased by 37% Y-o-Y basis to INR 339 crore as of March 2021 from INR 247 crore as of March 2020.
  • With Total Live Folios amounting to 1.1 crore as on 31 March 2021, our client base accounted for 11% of the total folios managed by the Indian MF industry.
  • We had the lowest complaints against folios at 0.0006% as compared to other AMC players in the industry as of 31 March 2021 (Source: AMFI).

Enhancing brand & visibility

We endeavoured to promote our brand prominence through investor segmentation. During the year, we launched our media campaign which reached 2 crore+ people. We started a financial literacy programme for college students and promoted campaigns like Swatantra, Millenial Money Matters, Equal Rights Equal Responsibilities, and Expert Se Poocho, among others. We also launched our marquee event named ‘The Colloquium’ on 18 March 2021 with the theme ‘Investing in the post pandemic world’.

Product development

During the year, we launched UTI Small Cap Fund, UTI Bank ETF, and UTI Nifty 200 Momentum 30 Index Funds. We are planning to launch more funds during the coming financial year after assessing the market conditions and based on the product gaps in our portfolio.

Financial highlights

For the year ended March 2021, we recorded a consolidated Net Profit of INR 494 crore as against INR 271 crore for 2019-20, showing a Y-o-Y growth of 82%. During the year, we undertook stringent cost control measures to manage our costs efficiently. Along with improvement in our PAT margins, our Return on Equity also reached a three-year high, touching 15% for 2020-21.

Enhancing investment management and risk

Our Fixed Income team has significantly enhanced its processes, including implementation of Early Warning System while strengthening the Research team. We also strengthened our risk management capabilities including technology enhancement, to mitigate risks and enable sustained growth of the Company.

ESG practices

Considering the significance of ESG parameters, we have proactively initiated measures for incorporating ESG aspects in our business strategy and for setting up a Board level ESG Committee.

Developing talent of our people

We believe that the skills and talents of our employees are critical for our success and reliable performance. We continued focussing on training and development, empowering our people and bringing inclusion. The HR team is focussed on improving the work culture and conducting learning engagement initiatives, benchmarking compensation, and long term incentive plan, among others. With the view to building a young and vibrant organisation, we onboarded 55 trainees during the year and are looking to hire fresh graduates from colleges across the country. In order to attract and retain talent, we have an Employee Stock Option Scheme.

Covid-19 appropriate protocols

As soon as the pandemic broke out, we set up a core internal team to monitor and address the situation, took measures for smooth functioning of business with various customer centric measures, adopted digital ways of working, provided requisite technological support, adhered to Government guidelines and initiated outreach programmes. We continued to focus on delivering stress free services to our investors during these trying times and took all possible steps to ensure smooth and efficient business operations.

We undertook measures to ensure our employees protection & good health and facilitated a seamless transition to work from home, supported with processes and tools for remote working, communication and collaboration. While the crisis tested the teams’ resilience, it also helped sharpen our value proposition to our investors and partners.

Future business outlook

Going forward, we are focussed on delivering consistent growth in terms of revenue, profitability, market share, and fund performance with emphasis on high-yielding products – like equity and fixed income. Our broad distribution network facilitates us to reach out to individual investors, particularly in B30 cities and other underserved areas, where we already have a stronghold. We will continue to strengthen our relationship with our institutional and PSU clients. Alongside, we will also particularly focus on developing relationships with MSME and SME institutional clients.

We are paying particular attention to growing our group AUM by accessing new markets, marketing our international funds, Alternative Investment Funds (AIFs) and Portfolio Management Services (PMS) products. The EPFO, CMPFO and ESIC mandates have helped enhance our credibility and we are leveraging our track record to pursue other opportunities.

The Retirement Solutions industry is in a nascent stage with a small percentage of the working population being under pension and social security schemes. There is a vast potential for the industry. It is expected that within the next 10 years, Pension AUM is likely to cross Mutual Fund AUM, increasing our business opportunity.

Overall, the MF industry is undergoing a fast transformation today. However, with a low AUM to GDP ratio and overall penetration as a percentage of GDP, India still lags behind countries like the US, Canada, France, and Brazil. The MF industry is still largely untapped. There are multiple growth drivers like overall economic growth, a growing investor base, higher disposable income levels, investable household surplus, higher awareness levels, and a favourable demography. These drivers have immense potential and are likely to propel growth going forward. The AMCs with a strong retail brand, large distributor network, and significant presence in B30 cities, will have the advantage of growing faster. UTI AMC is well positioned on all these fronts.

Striving to make a difference

Our consistent focus has been on our investors and stakeholders. We have been working relentlessly to enhance value for them by implementing relevant strategies, building a stronger brand which is known for its integrity and innovation. The listing of UTI AMC has brought in enhanced governance practices & disclosures and it is our endeavour to transform the organisation as one of the finest investment institutions, with highly skilled & strengthened investment team, committed to the welfare of all our stakeholders. Our business strategies are aligned to increase brand visibility, realise the potential opportunities, meet emerging challenges and work towards sustained growth. We endeavour to build the talent of our human resources, offer differentiated products and services and achieve excellence in all our operations. We strive to enable our investors to achieve their long-term financial goals. We aspire to provide them the best-in-class services to ensure a smooth investment journey for them. I am thankful to the Board of UTI AMC as well as the Regulators for all their support in our efforts.

Conclusion

On a closing note, I am pleased to inform you that the Board of Directors (subject to the approval of shareholders) has approved a final dividend of INR 17 per share for 2020-21 which is approximately 61% of the PAT.

On behalf of the entire Board of Directors and the management team, I would like to thank you for your continued trust, guidance and support to us.

With warm regards,

Imtaiyazur Rahman
Chief Executive Officer & Whole-Time Director

CHAIRMAN’S COMMUNIQUÉ

“Last year, despite the challenges and the subsequent business impacts, we managed to progress; determined and backed by our commitments of delivering increasing value for our stakeholders.”

Dear Shareholders,

It is encouraging that after the economic impact felt by countries across the world due to Covid-19 induced pandemic, most economies are gradually recovering with cautious optimism. Despite the adversities, this crisis has made humanity come together, highlighting our cumulative spirit and resilience. ‘Comeback from Setback’ is possibly an appropriate articulation of 2020–21.

What kept us engaged in 2020-21

To begin with, I would like to highlight a landmark event, wherein we were successfully listed on both the National Stock Exchange (NSE) and the BSE. It marked the welcoming of our valued retail and institutional shareholders into the Company. The NSE further included the equity shares of UTI AMC in the Nifty500 index w.e.f. from 1 March 2021. Besides, as a testimony to the commitment of delivering value to our stakeholders, we took the leap by coming out with our first public Annual Report, in the form of an Integrated Report . As a Company, we have always believed in constantly evolving. And this is a part

of our evolutionary journey. It is a step closer towards our endeavour of maintaining integrity and transparency in all our communications. Our entry in this space is in line with the existing global trends of reporting.

Last year, despite the challenges and the subsequent business impact, we managed to progress; determined and backed by our commitment of delivering increasing value for our stakeholders. We restructured our sales and marketing functions, focussed more on distribution & digital outreach, improved our fund performance, incorporated ESG processes and strengthened credit research processes. Additionally, we put in place policies and governance systems wherever required for a well-run listed Company.

The pandemic made us rethink our priorities. However, our conviction of becoming a more robust investment-led organisation is something we have never deviated from. We have been progressively continuing to do so, supported by our rich 55+ years’ legacy and lineage. The same was reflected in the performance of the Company during the year.

Industry developments

The capital markets crashed during the end of March 2020, the sentiments of which carried through early April 2020 – marking an unprecedented downslide in recent memory since the 2008 financial crisis. Despite the initial uncertainties, the markets remained buoyant, with increased participation from retail and institutional investors. It is encouraging that many international organisations like the International Monetary Fund and the World Bank have forecasted the GDP growth rates amongst the highest across emerging economies like ours. The strong rebound expected in private consumption and investment growth is likely to propel the economy forward.

Our response to Covid-19

Apart from strengthening ourselves as an organisation, we focussed on three priorities during the year — smoother business conduct, safeguarding our employees while conducting business and ensuring that we provide our investors and partners with convenient digital tools for them to transact seamlessly. We are continuously building interfaces for fintech, payments and other digital distribution platforms to ensure excellent connectivity and a better customer experience. We have implemented digital KYC for virtual interaction with new customers to ease our investors’ and partners’ investment journeys. These, together with many other initiatives, would enable us smoothly conduct our business without getting much affected by the situation outside.

Outlook

Active Equity and Debt Funds will drive the evolution of the MF industry. Despite the cyclicality of flows, India is well and truly on track to ensure the financialisation of savings across the board while money is moving out of physical assets. Moreover, mutual funds are still much smaller than bank deposits, signifying more room for growth. One of the emerging themes in Equity Funds will be increasing awareness about ESG Funds, passively managed ETFs and index funds. Exchange Traded Funds (ETFs) and Index Funds are yet to gain significant traction in India. However, there is a positive trend towards these funds, especially from the public sector fund mandates and first-time investors investing through fintechs and digital platforms.

“We are continuously building interfaces for fintech, payments and other digital distribution platforms to ensure excellent connectivity and a better customer experience.”

Conclusion

On a concluding note, I would like to express my gratitude towards all our valued stakeholders. They have continuously supported and encouraged our Company and the Management, and we are deeply thankful to them for the same. Your unwavering faith, support and inspiration have helped us build a value-creating organisation. I would also like to express a special thanks to our employees. They have demonstrated exceptional flexibility and adaptability in the wake of Covid-19. Lastly, I extend my best wishes for all shareholders and their families during these testing times, wishing everyone the best of health.

Warm regards,

Dinesh Kumar Mehrotra
Chairman