SBI Funds Management has become one of the listed asset management companies (AMCs) on Dalal Street, providing another investment opportunity for investors to benefit from the expansion of the Indian equity market. Its market rollout, however, has been less than expected.
Key Highlights
- SBI Funds Management debuted at a 7% premium, missing the 16% listing pop analysts expected.
- Analysts remain split, with some preferring SBI Funds and others favouring HDFC AMC for long-term value.
On July 21, shares of the country's biggest asset manager debuted at Rs 613.30 apiece, a 7% premium over the offer price of Rs 574 - missing expectations, as analysts and the grey market had signalled a listing pop of nearly 16%. The gap between anticipated and actual gains left many investors who had bet on a stronger debut somewhat disappointed.
One of the Most Bid-For IPOs of the Year
The disappointing listing came despite overwhelming demand during the IPO itself. The offering, valued at Rs 9,812.91 crore, had drawn bids for over 5,189 million shares against just 124.56 million shares on offer, making it one of the most bid-for offers of the year. This intense demand, however, complicated the allocation math, with many investors missing out on shares altogether despite the strong overall subscription numbers.
SBI Funds Management shares fell Rs 19.05 (3.12%) to Rs 590.70 during the day on the stock exchanges trading within a day range of Rs 585.30 to Rs 609.00 and a 52-week range of Rs 585.30 to Rs 625.00 - indicating that the stock has further cooled off from its initial listing price on the stock exchanges in subsequent sessions.
SBI Funds vs ICICI Pru AMC vs HDFC AMC: What Analysts Say
With the listing now behind it, the key question for investors is how SBI Funds stacks up against established peers ICICI Prudential AMC and HDFC AMC. Kranthi Bathini of Wealthmills Securities said that as financialisation of assets continues to gain momentum in India, AMCs are expected to see further growth in assets under management (AUM) over coming quarters. He noted that all three top AMCs have strong distribution networks and established brands built over decades, together commanding 40% overall market share.
Given that all three asset managers have posted steady double-digit profit and revenue CAGR over the past three years, valuation has become the key differentiator for analysts - and on that front, SBI Funds emerges as a preferred pick for several experts.
Also Read: SBI Funds IPO Success Puts India's IPO Market Back in Focus
Vinit Bolinjkar, Head of Research, Ventura Securities, said SBI Funds has strong scope for appreciation from here. "To do a 20 per cent CAGR is not difficult on earnings. With this kind of growth, there is still a lot of juice left on the table, and one can look at buying into it," he said, ranking his pecking order as SBI Funds, followed by ICICI Prudential AMC and HDFC AMC. Bathini echoed this sentiment, calling SBI Funds "reasonably valued, offering a favourable opportunity for long-term investors."
Now, SBI Funds Management has become one of the listed asset management companies (AMCs) on Dalal Street, providing another investment opportunity for investors to benefit from the expansion of the Indian equity market. Its market rollout, however, has been less than expected.
Ravi Singh, Chief Research Officer at Mastertrust said, "The still does not have a preference among the AMC firms, but SBI Funds Management has the potential of being a good wealth creator in the future. Singh referred to the consistency of profitability, the quality of the equity-oriented portfolio and healthy cash flows of the HDFC AMC. Its business model is stable, it's executed well and the stock is usually a premium, and investors have been willing to pay for that."
