SBI mutual fund to raise $1 billion via IPO route

If the State Bank has its way, SBI MF could be the next big AMC to list on the Indian bourses. Currently, India already has 4 major AMCs listed on the stock exchanges. These include HDFC AMC, UTI AMC, Nippon Life AMC and Aditya Birla AMC. All these four funds feature in the top-15 funds in India in terms of AUM, but SBI alone has an AUM of above Rs.6.20 trillion. Clearly, it is the largest mutual fund by a margin and its listing will be crucial.

SBI has already shortlisted a syndicate of 7 investment banks as it gears up to launch a mega IPO and raise nearly $1 billion or Rs.7,600 crore via an offer for sale. The overall SBI MF is expected to be valued at around Rs.76,000 crore and the total OFS will be for 10% of the equity of SBI MF. While Amundi will offer 4% stake in SBI Mutual Fund, the State Bank of India will offer the other 6% in the OFS. Amundi is the JV partner of SBI in SBI Mutual Fund.

The last one year has seen robust growth in terms of overall mutual fund AUM as well as collections in terms of flows and SIP numbers. For instance, if you consider the month of January 2022, total flows into equity funds were to the tune of Rs.14,888 crore while the total SIP flows stood at a record Rs.11,517 crore. SIPs are important as they represent sustainable long term flows into equity and equity oriented funds from retail investors.

For SBI, the big story has always been about unlocking the value hidden in its subsidiaries. SBI has already listed SBI Life Insurance and SBI Cards. SBI Mutual Fund is the next big story from the SBI stable and once that happens, it will enable SBI to show a much better sum of parts valuation. SBI Mutual Fund is a joint venture between State Bank of India and the leading French insurer and fund manager, Amundi Asset Management.

The IPO of SBI Mutual Fund is unlikely in this fiscal because SBI is yet to file the draft red herring prospectus with SEBI. Once that is done, it takes about 2 months for SEBI to approve the DRHP and only then the IPO process actually starts. Hence, the most likely time frame for the SBI Mutual Fund IPO is either the first quarter of FY23 or the second quarter of FY23. The $1 billion fund raising will make it the largest among the mutual fund IPOs till date.

While the final size of the IPO is yet to be finalized, the early indications and reports are that the IPO size would be around $1 billion entirely as an OFS. For the purpose of the IPO, SBI has already shortlisted the investment banks who will lead manage the issue and these include Bank of America Securities, Citigroup, HSBC Securities, Axis Capital, Kotak Mahindra Capital, SBI Capital and BNP Paribas. Most of the other details are yet to be finalized.

In the last few years, SBI Mutual Fund has gained substantial market share and they are at about 17% of the total AUM of the Indian mutual fund market. Currently, if you add across all fund management formats, then SBI Funds manages around Rs.15 trillion. Now, this is substantial, not only by domestic standards but also by global standards. SBI MF is a leader not only in managed funds but also leads in managing passive money and the PMS segment.

In terms of ownership structure, SBI holds 63% stake in SBI MF and 37% stake is held by AMUNDI Asset Management. For the fiscal year FY21, SBI Mutual Fund had reported total income stood at Rs.1,568 crore and bottom line profits of Rs.860 crore implying net margins of 54.85%. SBI MF has an Equity / Liquid / Debt ratio of 56:16:28. It has the largest SIP book at Rs.1,382 crore. It is the equity component that lends itself to better market valuations.

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