SBI Funds Management is entering the public markets at a discount to listed asset management companies (AMCs). The IPO is priced at a price-earnings (P/E) multiple of 38.2, compared with 47.7 for ICICI Prudential AMC, 41.1 for HDFC AMC and 50.9 for Nippon Life AMC.
The relatively lower valuation may partly reflect its asset mix. While the fund house is the largest in the industry by assets under management, it has a lower share of equity-oriented schemes than some listed peers. Its market capitalisation-to-equity ratio is 20 compared with 24 for ICICI Prudential AMC and 23 for Nippon Life AMC.
AgenciesSince equity funds generate significantly higher fee income and profitability than debt and liquid schemes, investors typically assign premium valuations to AMCs with a larger equity franchise. As a result, SBI Funds Management’s lower P/E and market-cap-to-equity multiples may reflect the market’s preference for higher-margin equity-focused asset managers.
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