SBI Funds Management: Jefferies Initiates ‘Buy’ with 26% Upside
By Business Desk
Jefferies initiates ‘Buy’ on SBI Funds Management, setting a Rs 710 target and projecting a 26% rally, citing strong SBI partnership and distribution moat.
Jefferies has initiated coverage on SBI Funds Management (SBI FM), India’s largest asset management company, with a “Buy” rating. The brokerage projects a price target of Rs 710, suggesting a potential 26% upside from the closing price of Rs 563.50.
Key Investment Highlights
- Price Target: Rs 710
- Potential Upside: 26%
- Current Closing Price: Rs 563.50
- Assets Under Management (AUM): Rs 12.5 trillion
The core of Jefferies’ bullish stance centers on SBI FM’s “distribution moat,” significantly bolstered by its exclusive collaboration with State Bank of India. This partnership with the country’s largest public sector bank is identified as a critical competitive advantage within the expanding mutual fund sector.
Growth Projections and Market Footprint
- Mutual Fund AUM CAGR (FY26-29): 18%
- Revenue Growth (FY26-29): 14%
- Operating Profit After Tax CAGR (through FY29): 15%
SBI FM maintains a robust footprint in rapidly expanding lower-tier markets, complemented by a diverse range of schemes and institutional scale. A notable advantage is State Bank of India’s 35% share in SBI FM’s equity AUM, significantly higher than competitors like ICICI AMC at 8% and HDFC AMC at 6%.
Jefferies anticipates that SBI’s extensive branch network, coupled with reduced distribution costs and strong customer loyalty, will allow SBI FM to broaden its reach. This expansion is particularly expected in regions beyond major cities, reinforcing its distribution moat as mutual fund penetration deepens across India.
The analysis also points to opportunities for SBI FM to diversify its product portfolio. This includes potential alternative investment options such as Portfolio Management Services (PMS), Alternative Investment Funds (AIFs), and Scheme Investment Funds (SIFs), targeting affluent customer segments.
In terms of valuation, SBI FM’s shares are currently trading broadly in line with HDFC AMC. This reflects a comparable earnings-growth trajectory, according to Jefferies’ assessment.