- SBI Funds Management received a Buy rating from Jefferies with a Rs 710 price target
- Jefferies highlights SBI FM’s exclusive tie-up with State Bank of India as a key strength
- SBI FM manages Rs 12.5 trillion in assets and leads India’s mutual fund industry by size
SBI Funds Management (SBI FM), the country's largest asset management company, has received a bullish initiation from Jefferies, which started coverage on the stock with a Buy rating and a Rs 710 price target. Based on the closing price of Rs 563.50, the target implies an upside of about 26%.
Jefferies' investment thesis centres on what it calls SBI FM's “distribution moat”, supported by its exclusive association with State Bank of India, India's largest public sector bank. The brokerage sees this parentage as a key differentiator as the mutual fund industry expands.
SBI FM has Rs 12.5 trillion of mutual fund assets, making it the largest AMC in India. Jefferies expects mutual fund AUM to grow at an 18% CAGR between FY26 and FY29, translating into revenue growth of around 14% over the period.
The brokerage also points to SBI FM's strong presence in faster-growing lower-tier markets, alongside a well-diversified scheme mix and institutional scale.
Jefferies sees SBI's 35% share of SBI FM's equity AUM as a major advantage, compared with just 8% for ICICI AMC and 6% for HDFC AMC. The brokerage expects SBI's extensive branch network, lower distribution costs and strong customer affinity to help SBI FM expand its reach, particularly beyond larger cities. SBI FM also has a higher exposure to lower-tier markets, where Jefferies expects faster growth, strengthening its distribution moat as India's mutual fund penetration deepens.
Operating leverage is another key part of the thesis. Jefferies expects operating profit after tax to grow at a 15% CAGR through FY29, with the AMC's expanding scale helping improve operating efficiency.
The brokerage also sees scope for SBI FM to broaden its product offering, including alternatives such as PMS, AIFs and SIFs, while expanding into affluent customer segments.
On valuation, Jefferies said SBI FM is trading broadly in line with HDFC AMC, reflecting what it sees as a similar earnings-growth profile.
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