SBI Funds Management IPO lists tomorrow with 18% GMP: Is it a long-term buy?

SBI Funds Management is set to make its stock market debut on July 21, and the IPO is already generating strong interest in the grey market. After receiving an overwhelming response during the subscription period, the company's shares are now trading at a healthy grey market premium (GMP), indicating a positive listing.

The latest GMP stands at Rs 101 per share. Based on the IPO's upper price band of Rs 574, the estimated listing price is around Rs 675, suggesting a potential gain of 17.6% over the issue price.

IPO SUBSCRIBED OVER 41 TIMES

The Rs 9,813-crore IPO was open for subscription from July 14 to July 16 and was subscribed 41.66 times overall.

According to SBI Funds Management, the issue received bids for 5,18,95,41,032 equity shares against 12,45,63,536 shares on offer.

Institutional investors led the demand. The Qualified Institutional Buyers (QIB) category was subscribed 140.11 times, while the Non-Institutional Investor (NII) portion was subscribed 22.51 times. The Retail Individual Investor (RII) category was subscribed 3.60 times.

The Employee Reserved category saw a subscription of 4.65 times, while the Shareholder Reservation portion was subscribed 9.52 times.

Overall demand for the IPO touched nearly Rs 2.98 lakh crore, making it India's fifth-largest IPO by total bid value.

WHY ARE ANALYSTS POSITIVE?

Geojit Investments believes SBI Funds Management is well placed to benefit from the long-term growth of India's mutual fund industry.

The brokerage said the company is the largest asset management company in India by quarterly average assets under management (QAAUM) and benefits from its scale and market leadership.

It said, "As India's largest AMC by QAAUM (15.3% market share), the company benefits from strong scale, industry-leading cost efficiency, extensive research coverage and favourable industry tailwinds."

Geojit also noted that the company is supported by strong growth, a predominantly active asset mix, diversified revenue streams and a long operating track record, which it believes position the company well for future expansion.

Here, it must be mentioned that SBI Funds Management was incorporated in 1992 and is the investment manager of SBI Mutual Fund. It is a joint venture between State Bank of India (SBI) and Amundi, Europe's largest asset manager.

SHOULD INVESTORS INVEST?

The strong subscription numbers and healthy grey market premium reflect positive market sentiment ahead of listing. Geojit Investments also remains optimistic about the company's long-term prospects, citing its leadership position, scale and diversified business model.

However, investors should remember that the grey market premium is unofficial and does not guarantee listing gains. Stock market performance on the listing day can differ from GMP expectations.

For long-term investors, SBI Funds Management's leadership in the mutual fund industry, large customer base and strong assets under management make it a company that many market participants will be watching closely.

Meanwhile, with the listing scheduled for July 21, investors will now be watching whether SBI Funds Management lives up to the strong expectations reflected in the grey market.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)