SBI Funds Management IPO: Should you ‘Subscribe’ or ‘Avoid’ this Rs 9,813 crore issue?
It’s a big day today. This year’s biggest issue so far, The SBI Funds Management IPO has opened. As the bidding for the Rs 9,812.91 crore IPO begins, the big question is should investors bid for this latest offering?
Most experts we spoke to gave a thumbs up to the issue in terms of its leadership position in the market and as a long-term bet on the AMC space.
SBI Funds IPO a ‘long-term bet’
Speaking on the overall issue size and the market share of SBI Mutual Funds, Sandip Sabharwal of Asksandipsabharwal.com believes that this issue can be a long-term bet but he expects near-term gains to be capped.
“Given the largest AMC in the country, the IPO is likely to get good demand. On valuations it’s not very attractive as it’s at some discount to HDFC and ICICI Pru AMCs but at premium to the smaller AMCs Any investment should be with a long-term perspective only as near term gains will be capped,” he added.
SBI Funds IPO a ‘long-term’ value proposition
The SBI MF is among the largest in the world. Market veteran Arun Kejriwal pointed out that “the biggest strength of SBI MF is that roughly a fifth of its total AUM historically and currently comes from SBI. SBI doesn’t sell any other mutual fund. That is one part. The second part is that with this reach of SBI, SBI being the largest bank in the country, it is in nook and corner of the country. And if you are now noticing, tier 2, tier 3 penetration of investment opportunities has started taking shape.” He sees this as a strong growth catalyst for the company.
From an investment perspective, he expects that there are chances of “listing pop but money in an AMC is never made for listing. It is made for investing and holding on like you would hold a mutual fund. So, there is opportunity, it is well priced and you need to value it not at Rs 30 trillion AMC value, but more at the mutual fund value and giving a significantly lower weightage for the lower yield instruments.”
SBI Funds IPO offers ‘unique competitive advantage’
Another market veteran, Ambareesh Baliga, highlighted that “despite the huge rise in investing population in India, the headroom is huge, as we are still at 18.5% of GDP. SBI AMC has a market share of 15%+ and along with this, the AMC’s dual parentage creates a unique competitive advantage that distinguishes it from both standalone domestic asset managers and other bank-affiliated AMCs in India.”
He believes that investors “should apply for long-term.”
SBI Funds IPO ‘an attractive bet’ in large AMC space
After the initial public offer (IPO), the parent SBI’s stake will fall to 54% from 62% and Amundi’s stake will fall to 33% from 36%. At the upper price band of Rs 574, “it is valued at 42x FY26 core EPS, which appears fair relative to peer multiples”, as per Incred Equities.
They added that the “improving quartile performance across one-year and six-month horizons, which could aid incremental market share gains and strengthen retail inflow momentum going ahead.”
Incred Equities believe that “the company is an attractive bet in the large AMC space and has a higher potential to re-rate with a sustained improvement in the performance of its schemes and yields, as compared to peers, given its retail focus and parental advantage.”
SBI Funds IPO priced at a ‘discount to ICICI Prudential’
Geetanjali Kedia, Chief Analyst at SP Tulsian Investment Advisers pointed out that the SBI Fund IPO pricing is attractive for those looking to apply for the issue.
She explained that “SBI Funds Management’s profitability is lower than ICICI Prudential’s. While it will be compared with peers like ICICI Prudential and HDFC AMC, its profit yield is lower than ICICI Prudential’s. However, the pricing has factored this in, and the IPO has been priced at a discount to ICICI Prudential. I believe the discount is adequate, and the pricing is attractive. Given the attractive valuation, I also expect a listing-day pop.”
SBI Funds IPO ‘fully priced’, recommend ‘Buy’
Speaking on the valuation of SBI Funds IPO, Anand Rathi believes that the issue is fully priced and recommend a “Subscribe” rating. They pointed out that, “At the upper price band, the company is valuing at P/E at 38.1x and EV/EBITDA of 33.6x to its FY26 earnings.”
According to Anand Rathi, “the company operates an asset-light, fee-based business model through the management of mutual funds, Portfolio Management Services (PMS), Alternative Investment Funds (AIFs), Specialized Investment Funds (SIFs) and advisory mandates across equity, debt, hybrid, passive and overseas investment products.”
Conclusion
Overall, most market experts and brokerages believe that the current IPO pricing accounts for the valuation gap with peers like ICICI Pru AMC and HDFC AMC. Though most see it as a strong long-term bet, they see the upside capped over the near-term. They advise investors to look at the company from a long-term investment perspective.
Disclaimer: Investment in the primary market involves a high degree of risk, and the metrics and brokerage recommendations listed above are for informational purposes only. An initial public offering (IPO) is subject to market volatility and capital risks, and dynamic performance indicators—such as grey market premiums, valuation multiples (including P/E and EV/EBITDA), and peer discount yields—may change rapidly. This analysis does not constitute a direct offer, solicitation, or endorsement to subscribe to or avoid the issue, nor does it guarantee listing-day gains or specific long-term returns. Investors must independently review the Red Herring Prospectus (RHP) filed with the Securities and Exchange Board of India (SEBI) and consult a SEBI-registered investment advisor before allocating capital.
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