SBI discloses IPO plans for its mutual fund unit

SBI may choose the IPO route for yet another of its entities, SBI Mutual Fund, which is expected to raise massive capital for the company

In continuation of the divestment in its life insurance and card business, the State Bank of India (SBI) is now planning an Initial Public Offering (IPO) for its mutual fund unit. The SBI Mutual Fund Trustee Company Private Limited plans to start the process of the IPO in the coming months. A discussion with the board and the fund partner AMUNDI is expected to be followed by discussions with investment bankers for proposals.

The SBI Mutual Fund is currently valued at around $7 billion and has assets under management to the tune of 5 trillion in Indian rupees. The fund recorded a net income of Rs 4.98 billion in the nine months ending December 2020. SBI Mutual Fund is a joint venture between SBI and French fund management company AMUNDI, with the latter holding 33% of the stakes. 

The planned public listing is expected to raise a billion dollars. In the previous IPO of an SBI unit, the SBI Cards and Payment Services raised $1.4 billion. Among other mutual fund companies in India, the UTI Asset Management Company and the HDFC Asset Management Company has already listed their shares in the past.

What is the background of the SBI Mutual Fund?

SBI Mutual Fund was set up in 1987 as a joint project between SBI and AMUNDI. AMUNDI is a French fund management company that is a subsidiary of Credit Agricole and Societe Generale. The fund presently has 59 different mutual fund investment schemes. It had also launched an offshore fund, namely the Resurgent India Opportunity Fund.

Related: How IPOs differ from NFOs? 

What are the types of fund offered by the SBI Mutual Fund?

The fund schemes offered by SBI Mutual Fund can be broadly categorised into four different types. 

• Equity mutual funds are ideally long-term investment options that invest in large-cap, mid-cap and small-cap shares.
• Debt mutual funds have a combination of debt and fixed income securities, including government securities, treasury bills, corporate bonds and other money market instruments. These fund schemes generally have a pre-defined maturity date and a fixed return on investment.
• Tax saving schemes come with a lock-in period of three years and offer tax deductions under section 80C of the Income Tax Act.
• Hybrid mutual fund schemes provide a balance between debt and equity to balance out the risk and still deliver a decent rate of interest.

Related: Is your IPO rightly valued?

How can you invest in the SBI Mutual Fund IPO?

If you are impressed with the performance and the numbers of SBI Mutual Fund you can plan to apply in its upcoming IPO. You will need a demat cum trading account, which can be opened through a brokerage house.

The Application Supported Blocked Amount is the next step, by dint of which your bank can block the required money in your account at the time of IPO bidding. You need to apply for at least the specified minimum number of shares at the bid price range. The SBI Mutual Fund will define a floor price and a cap price, within which you need to apply. Your amount will remain blocked till the allotment of the SBI Mutual Fund shares. If the shares are oversubscribed, you will get a lesser number of shares than what you applied for. A Confirmatory Allotment Note will be shared with you after the closure of the IPO. If the SBI Mutual Fund share is received positively in the market, you will gain from the early bird advantage by applying for the IPO. Do you know SEBI relaxes IPO norms to ease LIC’s IPO roll out? Read this piece to know more.