SBI Funds IPO: Check the latest GMP before listing; should you expect a solid listing pop?

Shares of SBI Funds Management are set to make begin their Dalal Street journey from Tuesday, July 21 as the State Bank of India-led mutual fund player is likely to deliver a decent listing pop to the investors, if one goes by the latest trends from the unofficial markets. The issue saw a bumper response from the interested investors, attracting bids worth Rs 3 lakh crore.

Ahead of its listing, shares of SBI Funds Management were commanding a grey market premium (GMP) of Rs 100-105 apiece, suggesting a 17-18 per cent listing pop for the investors. Its GMP has remained stable through the bidding process, hovering in the Rs 90-110 range through the IPO journey.

SBI Fund Management is one of India's largest asset management companies, backed by the strong parentage and supported by a well-diversified product portfolio and extensive distribution network, the company is well-positioned to benefit from the structural growth in India's asset management industry. The issue was fairly valued, said Mahesh M Ojha, Vice President of Research at KC Securities. 

"We recommend a 'hold' for investors receiving allotment, with a medium- to long-term investment horizon, as it remains well-placed to capitalize on the secular growth of the asset management industry, "Fresh investors may consider waiting for post-listing price stabilization, particularly if the stock lists at a premium of 15–18 per cent, before initiating fresh positions," he said.

The IPO of SBI Funds Management ran for subscription between July 14-16. It had offered its shares in the price band of Rs 545-574 per share with a lot size of 26 shares. The mutual fund player eyed to raise a total of Rs 9,813 crore via IPO, which was entirely an offer-for-sale (OFS) of up to 17,09,56,631 equity shares by its parent SBI and Amundi.

SBI Funds is likely to deliver around 15-20 per cent listing gains, Rather than focusing only on listing gains, the IPO offers better long-term value for investors with a 2-3 year investment horizon, said Prasenjit Paul, Fund Manager at 129 Wealth & Research Analyst at Paul Asset. 

The business is well placed to benefit from India's gradual shift of household savings towards financial assets, along with the increasing penetration of SIPs across smaller cities and towns, he said.

The issue was overall subscribed 41.66 times fetching nearly 63.82 lakh applications. The portion for qualified-institutional bidders (QIBs) was subscribed a solid 140.11 times. The quotas for non-institutional investors (NIIs) and retail bidders were subscribed at 22.51 times and 3.6 times, respectively. Employee and shareholder portions were booked 4.65 times and 9.52 times, respectively.

SBI Funds is the biggest AMC, the fund house manages money for 18 million retail investors, in the country and it's coming at the cheapest multiple, said Gaurav Garg, Research Analyst at Lemonn. "Over half of Rs 29.5 lakh crore it manages is EPFO money, but it yields only 3.5 per cent of revenue. IPO is fairly valued and is not cheap as misjudged just by only looking at PE numbers."

Established in 1992, SBI Funds Management is the largest asset management company (AMC) in India based on assets under management (AUM). It is a joint venture between State Bank of India and Amundi. It offers a wide range of investment products such as equity funds, debt funds, hybrid funds, ETFs, and portfolio management services (PMS). 

Kotak Mahindra Capital, Axis Capital, BofA Securities, HSBC Securities & Capital Markets, ICICI Securities, Jefferies India, JM Financial, Motilal Oswal Investment Advisors and SBI Capital Markets were the lead managers and Kfin Technologies was appointed as the registrar of the issue. Shares of the company shall be listed on both BSE and NSE.