SBI AMC IPO: 34-year-old SBI Funds Management, the country’s largest asset management company (AMC), is moving closer to a public listing. It has secured SEBI’s nod for its upcoming Initial Public Offering, which is expected to launch early in July. The IPO will be entirely an Offer for Sale (OFS), with existing shareholders SBI and Amundi India set to sell a part of their holdings in the company. Here’s what investors need to know about the upcoming issue.
For retail investors, the IPO offers a chance to participate in a different side of the mutual fund business. While mutual fund investors generate returns based on the performance of the schemes they invest in, shareholders of an asset management company (AMC) benefit from the growth and profitability of the fund management business itself.
In March, the asset management company filed a draft red herring prospectus (DRHP) with Sebi to launch an IPO.
SBI Funds Management is a joint venture between SBI and France-based Amundi, which currently holds a 61.9 per cent and 36.4 per cent stake, respectively.
Amol Joshi, Founder, Plan Rupee Investment Services, said, “Being a unitholder and a shareholder are two different things, just like investing in mutual funds is different from investing in stocks. You are responsible for your own research, entry and exit timings, and so on. You also forgo one of the biggest advantages of mutual funds, i.e. diversification across a number of stocks. Choose to invest only if you are an active stock picker and can assess the business and the stock performance on an ongoing basis.”
SBI AMC IPO: Here’s what investors should note
Investors should also note that the proposed issue is an offer-for-sale only, meaning the proceeds will not be used to fund the company’s growth plans. Investors will be buying shares from existing shareholders.
Col Sanjeev Govila (Retd), CEO of Hum Fauji Initiatives, a financial planning firm, said, “Since it is an offer-for-sale, the IPO proceeds go to selling shareholders, not into fresh business expansion. So the business as such does not benefit from the IPO money collected, only the shareholding changes.”
Govila added, “SBI Mutual Fund is undoubtedly a strong business, but the IPO price band has not yet been announced. Therefore, my view is conditional. Investors should not apply merely because the SBI name inspires comfort. If the valuation is reasonable compared with listed AMC peers, long-term investors may consider it. If it comes at an aggressive premium, waiting after listing may be wiser.”
