India’s largest asset manager finally started to trade on the secondary market. It was listed at a premium of approximately 7% from the issue price. The brokerage houses Emkay Global Financial Services and Equirus Securities initiated coverage on the stocks; details can be found below-
Emkay Global initiated coverage on SBI AMC with a ‘Buy’ rating and a price target of Rs 750, implying 31% upside from the IPO allotment price of Rs 574.
The brokerage house said that the target multiple is broadly in line with large peers such as ICICI AMC and Nippon Life India Asset Management. SBI’s brand, distribution, and under-penetration among SBI Bank customers present SBI AMC with a runway that supports higher growth over a longer period, hence commanding a premium valuation.
The brokerage said that its positive view rests on three pillars:
1) SBI’s brand and distribution, coupled with significant under-penetration of SBI MF within the SBI Bank channel (5.5 million customers vs 21 million salary package accounts), position SBI AMC to benefit from India’s long-term mutual fund growth story, particularly in Bharat (B-30 towns and villages).
2) The sustained shift in asset mix toward higher-yielding assets such as Equity and Alternate Investments (AIF/PMS) is likely to support revenue yields.
3) Economies-of-scale-led operating leverage is expected to drive 17% EBITDA CAGR over FY26-29. As the savings and investment needs of Indians evolve, the middle class is increasingly embracing mutual funds as its core investment vehicle, and SBI AMC has all the ingredients to become “the asset manager to every Indian,” just as its parent has become “the banker to every Indian”.
Another brokerage house, Equirus Securities, finds the company’s valuation attractive at 30x FY28 EPS and termed it as ‘Powered by Reach. Built to Compound’. This led the brokerage house to initiate coverage on the AMC with a ‘LONG’ rating and a 12-month target price of Rs 675, which is based on a valuation of 35x FY28 EPS, implying an upside of 18%.
A rich business mix and scale-led operating leverage sustain more than 40% RoEs.
“We expect FY26-FY29E revenue and EBITDA CAGR of 14% and 15%, driven by robust MF
AUM growth and improving operating leverage,” said Equirus Securities.
To give you context, the company’s revenue compounded at 25% over FY21-FY26, driving EBITDA margins to 79%, net profit margins to 70% and RoE to 43%.
Excluding other ETFs, FY26 net profit yields stood at 35 basis points, broadly in line with ICICI AMC and above 33 bps for HDFC AMC.
Also, the asset manager has high-quality earnings. It is the country’s largest PMS platform with a 39.7% market share, standing at Rs 16.9 lakh crore PMS & Advisory AUM, and one of the largest SIF platforms having 28.2% market share.
The company’s AIF AUM compounded at 29% over FY24-FY26, while non-MF revenues grew at 24% CAGR over FY21-FY26.
SBI Funds Management’s operating expenses of 7.6 basis points of QAAUM were the lowest among India’s top 10 AMCs.