Broker’s Call: SBI Funds Management (Buy)

SBI Funds Management (SBI FM), India's largest Asset Management Company, manages a massive ₹12.5 lakh crore in mutual fund assets. It benefits from several key differentiators, including a partnership with India's largest public sector bank, a leadership position in emerging markets, a well-diversified portfolio, and extensive institutional scale.

With 35% of its assets under management (AUM) tied to SBI, SBI FM gains various advantages from its parent bank. The bank's expansion potential, lower distribution costs, and strong customer affinity for its schemes all contribute to SBI FM's growth potential.

SBI FM's performance has been on an upward trajectory, with two to five schemes consistently ranking in the top tiers from FY25/26 to FY24. The company anticipates mutual fund AUM to grow by 13% between FY26 and FY29, supported by stable yields and a healthy revenue compound annual growth rate (CAGR) of 14% through FY29. Additionally, SBI FM's operating profit is expected to grow at a compound annual growth rate (CAGR) of 15% till FY29, driven by operating leverage and the company's scale allowing for lower operating expenses compared to its peers.

However, the company's profit after tax (PAT) growth will be comparatively slower at 13% CAGR due to a 30% year-on-year decline in investment assets in FY26, which was partially offset by a one-time interim special dividend of ₹3,560 crore. Despite this, SBI FM is trading at a 5% discount to HDFC AMC and a 10-20% discount to ICICI AMC and NAM, with a price-to-total-returns (TP) of ₹710 based on a 40x September 2028e OPAT multiple, which is in line with its peers considering a similar earnings growth profile.