SBI Funds Management share price will be in focus on Monday after HSBC and BofA Securities initiated coverage on India's largest asset manager with a ‘Buy' rating, citing its strong distribution franchise, scope for margin expansion and long-term financialisation opportunity.
HSBC has SBI Funds Management share price target price of Rs 660, implying about 32x FY28 estimated earnings, while BofA's target stands at Rs 685, valuing the stock at 33.4x FY28 estimated earnings.
HSBC believes SBI Funds' recent loss of market share is temporary and expects improving fund performance to support a recovery in assets under management. The asset manager has lost around 100 basis points of individual mutual fund monthly average AUM market share over the past two years.
However, HSBC highlighted SBI Funds' structural distribution advantage. Around 38% of equity and hybrid AUM is sourced from group companies, where it enjoys more than 90% counter share, while another 21% comes through direct distribution. The brokerage expects equity and hybrid AUM growth to recover to around 20% CAGR over FY26-29, versus a 12% year-on-year increase in Q1 FY27.
BofA also sees SBI Funds benefiting from its parent SBI's extensive branch network and customer base. SBI-linked distribution contributes around 20% of overall mutual fund AUM, while mutual fund AUM is equivalent to only 21% of SBI's deposits, compared with 30% for HDFC AMC and 62% for IPRU AMC.
Both brokerages see scope for yield expansion as SBI Funds increases its exposure to higher-yielding non-mutual fund businesses and improves its asset mix. BofA noted that the company's cost-to-QAAUM stood at just 0.08% in FY26, highlighting its operating efficiency.
HSBC forecasts around 17% EPS CAGR over FY26-29, while BofA expects an 18% PAT CAGR. Both brokerages believe stronger AUM growth and improving profitability could drive a valuation re-rating.
Key risks include continued fund underperformance, loss of SBI counter market share, slower growth in non-MF AUM and competitive pressures.
On Friday, SBI Funds Management share price ended 0.30% higher at Rs 563.80 apiece on the BSE.
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