The initial public offering (IPO) of SBI Funds Management opened for subscription on Tuesday, July 14, amid strong interest from investors, looking to raise Rs 9,812.91 crore. The IPO has also attracted attention in the grey market, where the latest grey market premium (GMP) indicates a potential listing gain of over 16%.
As of 9:29 am on July 14, the SBI Funds Management IPO was commanding a GMP of Rs 93. Based on the upper price band of Rs 574 per share, the estimated listing price stands at around Rs 667, implying a potential listing gain of 16.20%.
However, market experts say investors should look beyond the GMP and focus on the company’s long-term prospects before making a decision.
WHAT IS DRIVING INVESTOR INTEREST?
SBI Funds Management is India’s largest asset management company (AMC) and manages the SBI Mutual Fund. It is a joint venture between State Bank of India and French asset manager Amundi.
The company enjoys a strong position in India’s growing mutual fund industry, supported by a wide distribution network, rising systematic investment plan (SIP) inflows and increasing financial awareness among investors.
Experts believe these factors make it well placed to benefit from the long-term shift of household savings towards financial assets.
SHOULD YOU SUBSCRIBE?
Prasenjit Paul, Fund Manager at 129 Wealth & Research and Research Analyst at Paul Asset, believes the company has strong long-term growth potential but advises investors not to expect very high listing gains despite the healthy grey market premium.
“SBI Funds Management is the market leader in the mutual fund industry with a strong brand and consistent profitability. The company is well-placed to benefit from the long-term financialisation of household savings and rising SIP penetration across smaller cities and towns,” he said.
He added that while the IPO is priced at a slight discount to listed peers such as HDFC AMC, Nippon Life India AMC and ICICI Prudential AMC, investors should remember that the issue is entirely an Offer for Sale (OFS).
“Considering the large issue size and the fact that it is entirely an Offer for Sale (OFS), investors should not expect significant listing gains. We believe the IPO is better suited for investors with a 2-3 year investment horizon rather than those looking for quick listing profits,” Paul said.
Shivani Nyati, Head of Wealth at Swastika Investmart Ltd., also recommended subscribing to the IPO from a long-term perspective.
She said SBI Funds Management is India’s largest AMC with a strong SIP franchise and benefits from the extensive SBI-Amundi distribution network.
According to her, the IPO is valued at 38.12 times FY26 earnings per share (EPS), lower than the industry average valuation of 41.64 times, making it reasonably priced compared with peers.
Nyati also highlighted the company’s strong financials, including a return on net worth (RoNW) of 43.02% and an EBITDA margin of 81.56%, which reflects the strength of its asset-light business model.
However, she noted that since the IPO is entirely an OFS, the company will not receive any fresh capital from the issue. Its future earnings will continue to depend largely on growth in assets under management (AUM) and overall market performance.
She recommended subscribing to the IPO for long-term investors because of its market leadership, healthy margins and attractive valuation relative to peers.
A WORD OF CAUTION
While the grey market premium suggests healthy investor interest, market experts caution that GMP is unofficial and can change before listing. It should not be the only factor investors rely on while deciding whether to invest.
For investors looking for quick listing gains, the large issue size and complete OFS structure could limit sharp listing-day gains despite the current premium.
However, those with a longer investment horizon may find the IPO attractive, given the company’s leadership in the mutual fund industry, strong profitability and India’s growing financial savings market.
