All eyes are on the big listing in a few hours. Yes, the much-talked-about SBI Funds Management will debut on D’Street after seeing a strong IPO subscription. Though the grey market premium has cooled from the euphoric 25% premium in early July to a steadier 16% now, most market experts believe this is still enough for a solid listing pop, though not the runaway debut some had priced in.
However, most highlight the long-term value proposition in the stock as well –
SBI Funds Management: ‘The discount is deserved’
Nakul Sarda, Founder of ProfitGate Capital Services believes that “the market is calling this a discount to HDFC and ICICI AMC, I’d call it a fair price for a different business.”
He explained that “SBI Funds Management is India’s largest asset manager, but it’s largest in the low-fee corner — passive, institutional, B-30 — which is why it earns less per rupee of assets than smaller rivals. The re-rating everyone wants depends on the active-equity mix improving, yet passive is growing faster industry-wide.”
That said he does not rule out the possibility of some listing day gains, “on listing day, sentiment may hand you a modest pop. Beyond that, don’t confuse the biggest AMC with the best-priced one.”
SBI Funds Management: ‘Investing for the long-term’
Market veteran, Arun Kejriwal “expects to see a listing pop. The issue may list at a premium of Rs 90 – 100 over the issue price of Rs 574 per share 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.”
He explained that “there is opportunity, it is well priced, and you need to value (SBI Funds Management IPO)it not at the Rs 30 trillion AMC value but more at the mutual fund value and give a significantly lower weightage for the lower yield instruments.”
How the structural growth story in mutual funds is evolving
Many market experts have pointed out that as a result of the IPO being structured as a 100% Offer for Sale (OFS), the initial premium is controlled. This is because the capital goes to the promoters selling stakes – SBI and Amundi – rather than funding immediate balance sheet expansion.
However, most pointed out that the issue is priced reasonably relative to its size and dominant scale. They consider that SBI MF offers an exceptional long-term accumulation play for investors looking to capture the multi-decade compounding story of Indian wealth creation.
According to another market veteran, Ajay Bagga, “the Indian mutual fund industry has officially transformed from a structural growth story into a highly efficient, mature financial engine. Historically under-penetrated, the sector has benefited from structural formalisation, aggressive financialisation of household savings, and an unprecedented expansion of Systematic Investment Plans (SIPs).”
He believes that “total Assets Under Management (AUM) for the industry is increasingly driven by a sticky retail base, rather than volatile corporate treasury flows. Captive flows from EPFO are aiding the passive AUM growth as well.”
Aditya Birla Capital too highlighted the diversified growth engines for SBI MF and how it goes beyond traditional mutual funds. They elaborated how, “SBI Fund Management is India’s largest passive fund manager with ETF and Index Fund QAAUM of Rs 4.1 trillion and a market share of 27.9%.”
But beyond mutual funds, it also manages Rs 16.9 trillion of PMS & Advisory assets and Rs 65.7 billion of AIF assets, while also holding a leading 28.2% market share in the emerging SIF segment, “providing multiple long-term growth avenues and revenue diversification.”
Key tailwinds driving SBI Funds Management
Sameer Sawant, Research Analyst at Mirae Asset Sharekhan also expects a listing day gains and pointed out the structural tailwinds driving the AMC.
He elaborated that “At the upper price band of Rs 574, India’s largest asset manager, SBI Funds Management (SBIMF), is valued at 38.1x FY26 P/E and 33.6x EV/EBITDA. This represents a notable discount to listed peers like HDFC AMC, Nippon Life AMC, and ICICI Pru AMC. Commandingly holding a 15.3% market share with Rs. 12.51 lakh crore in MF QAAUM, the company benefits from strong SBI-Amundi parentage and an unmatched pan-India distribution network.”
Moreover, “SBI MF enjoys one of the lowest cost-to-income ratio at 20% in the industry and a superior 51% ROE that significantly outstrips its competitors. Driven by structural tailwinds like the rising financialisation of savings and a broadening SIP culture, the IPO culminated in an overwhelming 42x subscription. Backed by strong leadership, operating leverage and reasonable valuations, the issue offers strong prospects for long-term growth and stands for moderate listing gains.”
SBI Funds Management: Compelling investment proposition
According to many, like Vincent K A, Senior Research Analyst, Geojit Investments, the company is well positioned to benefit from the structural growth of India’s mutual fund industry, supported by rising SIP inflows, increasing retail participation, and the ongoing financialisation of household savings.
“The favourable industry outlook supports premium valuations for the sector and is likely to sustain them over the medium term. Despite its leadership position, the IPO is priced at a discount to listed peers, primarily due to its relatively lower yield profile arising from a higher proportion of EPFO-managed assets. Nonetheless, given its strong return on equity and profitability—among the highest in the industry—supported by its market-leading position, scalable franchise, and asset-light business model, the company offers a compelling investment proposition. We recommend subscribing to the IPO from a medium- to long-term investment”
Uday Patil, Executive Director, PL Capital is also optimistic about a pop on listing day, “SBI MF IPO is going to be the thumping successful IPO subscription-wise. If GMP is any indication, it is expected to have a good listing pop also. Moreover, it is definitely a long-term hold scrip, as IPO is being valued at a lesser percentage of its AUM as compared to peers.”
Conclusion
Most market participants believe that the SBI Funds Management IPO will definitely deliver gains on listing day, in line with the GMP. However, they are betting more on the long-term value proposition given the structural tailwinds driving the Mutual Fund industry and the listed AMC sector stocks in India.