UTI Asset Management, India’s oldest fund house, saw its profit after tax (PAT) decline 19 per cent to Rs 137.5 crore in 2010-11, a year in which most major asset managers showed healthy growth in profits. However, UTI was the third most profitable firm after Reliance and HDFC.
The company’s operating profit fell 30 per cent to Rs 166 crore from Rs 239 crore in FY10.
This is the second-lowest profit declared by the asset management company in the last five years. The company had fared worse only in FY09, when it reported a profit after tax of Rs 115.87 crore, at a time when the global credit crisis had depleted equities and debt portfolios.
Against Rs 43 crore earned as dividend in FY10, the company’s shareholders earned Rs 34 crore this year. While T Rowe Price, which owns 26 per cent in the company, received Rs 8.94 crore, four state-owned firms that account for the remaining stake, earned Rs 6.36 crore each
According to company officials, the low profit in 2010-11 resulted from a steep fall in assets under management, which led to a lower investment management fee. Fee earnings fell five per cent to Rs 420.4 crore from Rs 442.75 crore last year, while assets fell 16.2 per cent.
“Volumes (assets) were lower this year. Margins on our fixed income portfolio were also better last year. The market was not as buoyant this year, and this resulted in lower fees,” said Jaideep Bhattacharya, chief marketing officer and managing committee member. Assets under management shrunk from Rs 80, 217 crore in March 2010 to an average of Rs 67,188 crore in the January-March quarter. The company also saw a 15.7 per cent rise in employee cost, which rose to Rs 148 crore. A sharp rise in marketing and scheme expenses also lowered the bottom line.
In February, U K Sinha, the then-chairman and managing director, resigned to take over as the chairman of the Securities and Exchange board of India. Since then, the company has been managed by an interim committee, comprising Bhattacharya, chief financial officer I Rahman, head (equities), Anoop Bhaskar, and head (fixed income), Amandeep Chopra. Since the committee is not able to clear new launches, it lags in asset gathering. In March, when the company’s rivals launched over 130 schemes and raised Rs 27,000 crore, UTI did not launch a single scheme.
The top post at the company has been vacant for eight months. Egon Zhender, a global head hunting firm, was appointed to help select a candidate after Sinha quit as UTI chairman. But the names it suggested did not secure the shareholders’ clearance. US-based T Rowe Price is said to be in the favour of a professional chief executive. State Bank of India, Punjab National bank, Bank of Baroda and Life Insurance corporation, controlled by the finance ministry, are said to support the candidature of Jitesh Khosla, an Indian administrative officer, currently in Assam.
Analysts say further delay in selecting a chief may hit earnings of FY12 as well. The fund house has already lost over Rs 4,000 crore in assets this year. “The (CMD) selection process should be completed soon. Business is being hit, and that shows in the results,” said a senior official at the fund house.
