State Bank of India greenlights 6% stake sale in mutual fund arm via IPO

India's largest fund manager could fetch valuations of over ₹1 trillion

The country’s largest lender, State Bank of India (SBI), on Thursday announced a divestment of its stake in SBI Funds Management (SBIFM) through an initial public offering (IPO) in 2026, a move that will further boost its capital position and support credit growth.

 

The bank, along with its joint venture partner, France-based Amundi’s India arm, will dilute a 10 per cent stake in the maiden share sale. Of this, SBI will sell 6.3 per cent of SBIFM’s total equity capital through the IPO, subject to regulatory approvals. Amundi India Holding will divest 3.7 per cent, the bank said in a release. Currently, SBI and Amundi hold 61.91 per cent and 36.36 per cent, respectively. The listing is targeted for the first half of 2026, and the promoters are eyeing a valuation of over ₹1 trillion, according to senior SBI executives. They are expecting to raise between ₹11,000 crore and ₹13,000 crore through the IPO.

 

SBI’s capital adequacy ratio at the end of September stood at 14.62 per cent, against the minimum requirement of 12.30 per cent.

 

Its common equity Tier-I capital ratio was 11.47 per cent. In the July-September quarter, SBI raised ₹25,000 crore via qualified institutional placement, which has enhanced its capital position.

 

The move is also in line with the finance ministry’s prodding to public-sector banks that they monetise non-core assets. Recently, Canara Bank’s mutual fund and insurance subsidiaries hit the capital markets via the IPO route.

 

This is the second time that SBI has initiated the process for SBIFM’s listing. In 2021, the bank had announced a similar plan to sell a 6 per cent stake, but shelved it later.

 

SBIFM manages around ₹28.3 trillion through its mutual fund schemes and the alternative investment vertical. Its mutual fund arm, SBI Mutual Fund (SBI MF), with assets under management (AUM) of about ₹12 trillion, is the largest fund house in India. It has a 16 per cent share of the mutual fund industry’s total AUM.

 

Once listed, SBIFM will likely become the seventh asset management company (AMC) with mutual fund operations to list on the exchanges. At present, there are five such listed AMCs — HDFC, Nippon Life India, Aditya Birla Sun Life, UTI, and Canara Robeco. ICICI Prudential AMC, which has obtained regulatory approval for an IPO, estimated to be worth ₹10,000 crore, could list soon. 

 

Among listed peers, HDFC AMC has the highest market capitalisation (mcap) at ₹1.2 trillion, followed by Nippon Life India at ₹55,000 crore. Websites that track trades in unlisted shares value SBIFM’s mcap at ₹1.3 trillion.

 

SBI Chairman C S Setty said the decision to list the subsidiary was driven by its leadership position and sustained performance over the years.

 

“Considering SBIFM’s sustained strong performance and market leadership over the years, it is considered an opportune time to launch the IPO process. Apart from maximising value realisation for existing stakeholders, the IPO will create opportunities for general shareholders, broaden market participation and lead to increased awareness of products to a wider set of potential investors,” he said.

 

SBIFM will be the third SBI subsidiary to list on the exchanges, the other two being SBI Cards & Payment Services and SBI Life Insurance Company.

 

“SBI General Insurance is next in line for an IPO. The bank would like it to be among the top three players in the general insurance space,” said another SBI executive.

 

The asset management industry in India, particularly the mutual fund segment, has seen robust growth in recent years, with the investor base expanding rapidly amid a sustained equity market rally. Monthly inflows through systematic investment plans have surged to about ₹30,000 crore, compared with ₹8,000 crore before the Covid period. 

 

 

Growing investor awareness and future growth runway have attracted both domestic and foreign players to the industry. The number of mutual fund houses crossed 50 this year, with eight new licences being granted in the past two years. This period has also been marked by the entry of foreign asset managers — the US’ BlackRock, Hong Kong-based PAG and South Africa’s Sanlam — through joint ventures and investments into existing fund houses.

 

Following recent reform measures, like rationalisation of goods and services tax rates, SBI has revised its credit growth target for FY26 to 12-14 per cent, up from the earlier projection of 11 per cent. SBI’s gross advances grew 12.73 per cent year-on-year until September 30 to ₹44.19 trillion.

 

Indian banks, including SBI, are also preparing for a transition to the expected credit loss framework for loan-loss provisioning, proposed to take effect from April 1, 2027. The Reserve Bank of India has proposed a four-year timeframe for banks to spread the impact of higher provisioning requirements.