Kotak Initiates Coverage On Three Indian AMCs Expecting Attractive Returns

Kotak Institutional Equities initiated coverage on Aditya Birla Sun Life Asset Management Co., UTI Asset Management Co., and Nippon Life India Asset Management Co. expecting attractive returns.

They would also benefit from the strong operating leverage, the brokerage said.

“Prevailing mutual fund regulations are much more balanced and well-aligned across the value chain and can spur market expansion in the next decade,” the brokerage said in its investor note dated Dec. 9. Listed Indian asset management companies have, in recent years, turned unattractive amid regulations and market forces, Kotak said.

As a result, despite near-all-time high equity flows and market levels, valuations fell.

The brokerage believes that incremental value creation will be a function of company-specific growth or margin levers, while passive risks will be ‘well contained’ in India.

The threat to Indian active managers is much more manageable than that of global peers, it said.