Jefferies initiated coverage on SBI Funds Management with a Buy rating and Rs 710 target, implying 26% upside, citing the AMC's distribution edge, low costs and projected 15% operating profit growth through FY29.
SBI Funds Management Ltd, India's largest asset management company, has drawn its first major brokerage endorsement since listing. Jefferies began coverage on the stock on Friday, August 28, 2026, assigning a Buy rating with a target price of Rs 710 per share. Against the previous closing price of Rs 563.50, this points to roughly 26% upside, though the figure touched nearly 29% when measured against intraday levels earlier in the day.
The stock itself was largely unmoved by the call. Shares traded around Rs 560.40 by 11 am, down about 0.4%, suggesting the market had not yet fully priced in the brokerage's optimism.
Why Jefferies is betting on India's largest AMC
SBI Funds Management currently manages mutual fund assets of about Rs 12.5 lakh crore, making it the country's biggest player in the segment. Jefferies' target price is built on 40 times the company's estimated operating profit after tax (OPAT) for September 2028 the same multiple the brokerage applies to HDFC AMC, reflecting its view that both companies have comparable earnings-growth trajectories.
The brokerage expects SBI Funds Management's operating profit to grow at a 15% compound annual rate through FY29, backed by an 18% CAGR in mutual fund assets under management and improving operating leverage. It has also pencilled in a 14% revenue CAGR and 13% profit CAGR between FY26 and FY29.
Central to Jefferies' thesis is the company's relationship with its parent, State Bank of India. SBI contributes 35% of the AMC's equity assets through its branch network a distribution advantage far ahead of what ICICI Bank (8%) and HDFC Bank (6%) provide their respective AMC arms. This built-in reach into smaller towns is reflected in the numbers: about 66% of SBI Funds Management's SIP inflows come from B30 markets, the industry term for locations beyond India's top 30 cities by mutual fund penetration.
The brokerage also pointed to reduced concentration risk, noting that the company's three largest equity schemes account for only 33% of its equity assets a more diversified spread than many peers carry. On costs, SBI Funds Management's core operating expenses run at roughly 3.3 basis points of average AUM, well below the 10-11 basis points typical for competing AMCs.
How the valuation compares with rival asset managers
At current levels, SBI Funds Management trades at about 37 times its estimated operating profit for September 2027. That works out to a 5% discount to HDFC AMC and a 10-20% discount to ICICI Prudential AMC and Nippon Life India Asset Management.
| Metric | SBI Funds Management |
| Jefferies rating | Buy (initiation) |
| Target price | Rs 710 |
| Implied upside | ~26% (up to 29% intraday) |
| Current valuation | 37x Sept 2027E operating profit |
| Target valuation basis | 40x Sept 2028E OPAT |
| Mutual fund AUM | ~Rs 12.5 lakh crore |
| Projected OPAT CAGR (FY26-29) | 15% |
Jefferies appears to be arguing that this discount is not fully justified given SBI Funds Management's scale, distribution strength and lower cost base relative to peers.
Recent earnings back the growth case
The initiation follows a steady June-quarter performance. For the three months ended June 30, 2026, SBI Funds Management reported consolidated net profit of Rs 880 crore, up 3.7% from Rs 849 crore a year earlier. Revenue from operations rose about 15% year-on-year to Rs 1,153 crore, even as other income declined roughly 28%.
Quarterly average assets under management (QAAUM) grew 11% year-on-year, while actively managed equity QAAUM rose 10%. These figures line up with the AUM growth trajectory Jefferies has built into its longer-term estimates.
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Risks the brokerage has flagged
Jefferies did not present an unqualified case. It flagged two specific risks that could weigh on earnings:
- Potential regulatory changes to expense ratios charged by AMCs, which directly affect fee income.
- A sustained decline in SBI Funds Management's share of industry equity inflows, which could erode its scale advantage over time.
The brokerage estimates that a 1 basis point cut in net equity yield could reduce earnings per share by about 2% over FY27-29 a reminder that regulatory action on fees remains a meaningful swing factor for the entire AMC industry, not just this one stock.
Context from a heavily subscribed IPO
Friday's coverage comes a little over five weeks after SBI Funds Management's stock market debut. The company raised Rs 9,812.91 crore through an offer-for-sale priced between Rs 545 and Rs 574 per share, with the issue subscribed roughly 41.6 times overall and institutional demand touching about 140 times. Shares listed on NSE and BSE on July 21, 2026, with a modest 6.85% listing-day gain.
Since then, the stock has drifted lower, trading roughly 4% below its issue price at various points. Jefferies' initiation is the first substantial brokerage assessment of the company's valuation since that listing, giving investors an independent framework for interpreting the AMC's long-term growth story alongside the near-term regulatory uncertainties facing the mutual fund industry.
