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SBI Funds Management Share Buy or Sell: The most awaited IPO of SBI Funds Management in the stock market has finally hit the market. Today, Tuesday, shares of the company listed at ₹613.3 with a premium of 6.85% against the issue price of ₹574. With this listing, the market capitalization of the company has reached ₹ 1,24,919 crore. However, compared to the strong subscription figures, this listing is considered a bit dull i.e. balanced. In such a situation, the biggest question is whether this stock still has earning potential or should investors exit after booking profits? Let us understand the complete mathematics after listing and know what strategy different types of investors should adopt going forward…

SBI Funds Management Listing: Key Figures

IPO price band- ₹545 to ₹574 per share

Listing Price- ₹613.3 per share

Listing Gain- 6.85% premium

Market Cap (on listing)- ₹1,24,919 crore

Post-Listing P/E Ratio- 40.72x

SBI AMC Share: What does 6.85% premium mean?

A single-digit listing gain shows that investors welcomed the company, but the market did not give it a very aggressive rating. The market has rated SBI Funds Management as a strong, reliable and established 'Quality Business' rather than a runaway 'Growth Stock'.

Are SBI AMC share prices fair even after listing?

• At the time of IPO, the stock was trading at a P/E (Price-to-Earnings) ratio of 38.12x. Post listing, at the price of ₹613.3, its P/E has increased to 40.72x. P/E ratio means how much price investors are willing to pay in the market for ₹1 of company's earnings.
• Even after listing, this stock is trading slightly below the average P/E of its competitors (Peer Average: 41.64x). This means that the valuation is not considered expensive but fair.
• The discount that investors were getting during the IPO has now ended. Now the leadership and brand value of the company is fully reflected in the share price.
• Despite being the country's largest asset manager, the market did not pay a huge premium to it. The reason for this is the increasing trend of passive funds and strict rules of SEBI, due to which there is pressure on fees.

What should an investor do now?

short-term traders

According to market experts, if you had come only for bumper listing gains, then this stock may disappoint you a bit. Unless there is quarterly results or some very positive news from the asset management industry, there seems to be limited scope for a huge short-term upside.

Medium-term investors

If the company grows its assets under management (AUM) faster than the overall industry and SIP inflows remain strong, then it could prove to be a good option for medium-term investors.

Long-term investors

If you want to bet on India's growing mutual fund industry and financialization of savings, then this stock is a great addition to your portfolio. This can become a stable and compounding stock in the long run.

Safe and Conservative Investor

Those who want to be a part of the country's number-1 asset management company with low risk can hold it. However, valuations have now come at par with the sector, so future returns will depend only on the business performance of the company.

What 5 things should investors keep an eye on?

1. The biggest source of income for asset manager companies is their AUM. The faster the AUM grows, the stronger the management fees and profits will be.
2. The market will now see whether the company's actual earnings justify its valuation of 40.72x or not.
3. If the returns of SBI's main mutual fund schemes are good, then new money (inflow) will come rapidly.
4. The popularity of passive funds (Index Funds/ETFs) may impact the margins of active funds.
5. After the listing, when the lock-in period of the promoters or anchor investors ends, there may be temporary fluctuations in the market due to increase in the supply of shares.

Disclaimer: The information given in this article is for educational and informational purposes only. This is not any kind of financial advice, recommendation to buy or sell shares (Investment Advice). Investing in the stock market and IPOs is subject to risks. Before taking any investment decision, please consult your certified financial advisor (SEBI Registered Financial Advisor).