Shares of newly listed SBI Funds Management fell 1% to Rs 572 on the BSE on Friday, declining for the second consecutive session and trading below the IPO price of Rs 574. Brokerages, however, remain optimistic about the stock.

The company, India's largest AMC by QAAUM, had made its stock market debut at a 7% premium on July 21. The Rs 9,813-crore public issue received strong investor demand and was subscribed 41.66 times overall. Institutional investors drove the response, with the Qualified Institutional Buyers (QIB) portion subscribing an impressive 140.11 times.

The Non-Institutional Investor (NII) segment was booked 22.51 times, while the Retail Individual Investor (RII) category received subscriptions of 3.60 times.

Time to buy?

Equirus Securities and Emkay Global recently initiated coverage with 'Long' and 'Buy' ratings, respectively. The firms have set target prices of Rs 675 and Rs 750 for March and June 2027, implying an upside of up to 17% and 30% from the IPO issue price of Rs 574.

Equirus says SBI Funds Management is one of the strongest franchises in India’s asset management industry, backed by scale, SBI’s distribution network, sticky SIP flows and strong profitability.

The strongest part of the SBI Funds story remains its parentage. Equirus said SBI Funds combines SBI’s network of more than 23,000 branches, over 100 million YONO users and 1.32 lakh mutual fund distributors. This gives it one of the widest distribution platforms in the industry.

Also Read: Coca-Cola appoints JPMorgan, Citi for India bottler IPO, sources say

SBI’s own distribution network is also a large feeder for the AMC. The brokerage said around 96% of the mutual fund AUM mobilised through SBI is managed by SBI Funds. SBI also mobilised more than Rs 250 billion of net inflows in FY25.

The report said SBI’s network has helped the AMC build one of India’s strongest SIP franchises. SBI Funds had 16.2 million live SIPs, SIP AUM of Rs 1.73 lakh crore and monthly SIP inflows of Rs 40.6 billion. About 68% of new SIP registrations came from B-30 cities, while more than 97% of SIP folios had persisted for over 37 months.

That matters for investors because SIP flows are considered stickier than lump-sum money. They also reduce dependence on short-term market timing.

Equirus highlighted SBI Funds’ asset-light business model and operating leverage. The company’s revenue grew at about 25% CAGR over FY21-FY26, faster than operating expense growth of 15% and employee cost growth of 13%. As a result, EBITDA and PAT margins expanded to about 79% and 70%, respectively.

For FY26, SBI Funds reported revenue of Rs 4,389.5 crore, EBITDA of Rs 3,471.8 crore and profit after tax of Rs 3,053.1 crore, according to Equirus. EPS stood at Rs 15, while return on equity was 42.8%.

The brokerage expects revenue to rise to Rs 5,097 crore in FY27, Rs 5,819 crore in FY28 and Rs 6,568 crore in FY29. It expects PAT to increase to Rs 3,384 crore in FY27, Rs 3,903 crore in FY28 and Rs 4,414 crore in FY29.

Emkay on SBI Funds Management

The brokerage's positive stance is anchored on three key factors. First, it believes SBI's strong brand, extensive distribution network and the significant under-penetration of mutual funds within the SBI Bank customer base position SBI Funds Management to benefit from India's long-term mutual fund growth story, particularly across B-30 towns and rural markets. SBI Mutual Fund currently serves around 5.5 million customers, compared with 21 million salary package account holders at SBI Bank, highlighting a large untapped opportunity.

Second, Emkay expects a continued shift in the asset mix towards higher-yielding products such as equity funds and alternate investments, including AIFs and PMS, to support revenue yields. Third, it expects economies of scale and operating leverage to drive an EBITDA CAGR of around 17% over FY26-29E.

The brokerage said the changing savings and investment preferences of India's middle class are driving greater adoption of mutual funds, and believes SBI Funds Management has the potential to become "the asset manager to every Indian", much like SBI has become "the banker to every Indian."

Despite mutual fund assets under management growing at a 20% CAGR over the 10 years to March 2026, the brokerage believes the industry remains significantly under-penetrated. Mutual fund AUM stands at 31% of bank deposits in India, compared with 216% in the U.S. and 48% in the U.K., while mutual funds account for only around 12% of household savings, leaving ample room for long-term growth.

SBI Funds Management's leadership across product segments, particularly in B-30 markets, along with its strong brand, extensive SBI-led distribution network and improving fund performance, is expected to drive AUM growth of around 17% over FY26-29E, according to Emkay. While yields are likely to remain broadly stable, the brokerage expects revenue to grow at a 16% CAGR during the period. Operating leverage and scale benefits are projected to expand margins to around 81% by FY29E, supporting an EBITDA CAGR of about 17%.