Can SBI Funds IPO deliver long-term growth for high risk investors?

AI Summary

SBI Funds Management, India's largest asset management company, plans to raise ₹11,693 crore through an IPO which will reduce the promoter stake from 98% to 88%. The firm leads in systematic investment plans and portfolio management services but carries risks tied to financial market volatility and regulatory changes.

ET Intelligence Group: SBI Funds Management, the country's largest Asset Management Company (AMC) by assets under management, plans to raise ₹11,693 crore through an offer for sale. The promoter stake will fall to 88% after the IPO from 98%. SBIFM is expected to benefit from the increasing participation of households in the equity market and State bank of India's extensive branch network across India. However, its business is exposed to volatility in financial markets. As such, the issue appears to be suitable for long-term investors with a higher risk tolerance.BusinessIncorporated in 1992, SBI Funds Management commands a 15.3% market share as of March 2026 based on mutual fund quarterly average assets under management (QAAUM) of ₹12.5 lakh crore.It manages assets across mutual funds, portfolio management services (PMS), alternative investment funds, offshore funds as well as specialised investment funds, with total QAAUM of ₹29.46 lakh crore.SBI MF is the market leader in systematic investment plans (SIPs), with 16.2 million live accounts, representing a 15rket share by count and 11.4% of industry inflows as of March 31, 2026. It is also India's largest PMS provider with a 39.7% market share. The company operates in a tightly regulated industry. Any changes to mutual fund fees or commission structures may affect its financial performance. 132378541FINANCIALS Revenue from operations rose 28% annually to Rs 4,389 crore between FY24 and FY26 while net profit grew 22% annually to Rs 3,067 crore. Return on equity expanded to 43% in FY26 from 36% in FY24. It has the lowest operating expense ratio of 0.08% among the top 10 AMCs in India compared with 0.10-0.25% for peers. VALUATION Despite having the largest AUM, it has a lower share of equityoriented schemes. As a result, it has a lower market capitalisation-equity AUM ratio of 20% compared with 24% and 23% for ICICI Prudential AMC and Nippon Life AMC respectively. AMCs with a larger proportion of equity and equity-oriented schemes tend to earn higher revenue since these products carry higher management fees than debt, liquid and other non-equity funds. The IPO commands a priceearning (P/E) multiple of 38.2 compared with 47.7 for ICICI Prudential AMC, 41.1 for HDFC AMC and 50.9 for Nippon Life AMC.