Jefferies initiates SBI Funds Management coverage with Buy; sees 26% upside

Jefferies has initiated coverage of SBI Funds Management with a Buy rating and a price target of Rs 710, implying a 26% upside from the stock’s previous closing price of Rs 563.50.

The brokerage based its target on 40 times SBI Funds Management’s estimated operating profit after tax (OPAT) for September 2028. This is in line with the multiple assigned to HDFC AMC, given the two companies’ similar earnings growth profiles.

SBI Funds Management is India’s largest asset management company, with mutual fund assets of around Rs 12.5 lakh crore. Jefferies expects the company’s operating profit to grow at a compound annual growth rate (CAGR) of 15% through FY29, supported by an 18% CAGR in mutual fund assets and operating leverage.


The company is promoted by State Bank of India (SBI), the country’s largest lender, which is also its largest distributor. SBI contributes 35% of SBI Funds Management’s equity assets, compared with 8% for ICICI AMC and 6% for HDFC AMC.

Jefferies said SBI’s large branch network gives the asset manager a strong and relatively low-cost distribution channel. The average mutual fund assets sourced per SBI branch currently equal only 10% of the branch’s retail deposits, indicating further room for expansion.

SBI Funds Management also has a strong presence in B30 markets, which cover locations beyond India’s top 30 cities. Around 66% of the company’s systematic investment plans (SIPs) originate from these markets, giving it exposure to faster-growing smaller cities and towns.

The company’s three largest equity schemes account for only 33% of its equity assets, reducing its dependence on a handful of flagship funds. Jefferies also noted an improvement in scheme performance, with the number of schemes in the top performance tier rising to two to five in 2025 and 2026, from just one in 2024.

The company’s core operating expenses stand at about 3.3 basis points of average assets under management, compared with 10-11 basis points for peers. Jefferies expects revenue to grow at a 14% CAGR and profit after tax at a 13% CAGR between FY26 and FY29.

However, the brokerage flagged changes in expense-ratio regulations and a sustained decline in equity-flow market share as key risks. It estimated that a one-basis-point reduction in net equity yield could lower EPS by around 2% over FY27-29.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)