Centrum Initiates Buy on SBI Funds with 34% Upside Target

Centrum Broking has started coverage on SBI Funds Management with a Buy rating and set a target price of Rs 700 per share, suggesting a potential gain of nearly 34 percent from current trading levels. The brokerage’s investment rationale, titled “Strong Franchise, Stronger Runway,” emphasizes SBI AMC’s extensive distribution network, leadership in B-30 markets, expansion beyond mutual funds, and relatively low operational costs as key growth drivers.

SBI Funds Management’s shares closed at Rs 518 on the NSE, slightly down by 0.94 percent from the previous close of Rs 522.90. The stock fluctuated between Rs 517 and Rs 524 during the trading session.

Mohit Mangal of Centrum Broking highlighted SBI AMC’s strong structural advantages that are expected to sustain growth in assets under management (AUM) and earnings. The firm benefits from its integration with the State Bank of India’s extensive branch network and digital platforms, which significantly broadens its reach to retail investors.

With access to more than 23,000 SBI branches and over 100 million users of the YONO app, SBI AMC captures over 96 percent of mutual fund assets sourced through SBI branches. Despite this, only about 5.5 million SBI customers—less than 2 percent of the eligible base—have invested with SBI AMC. This gap signals significant potential to cross-sell mutual funds and other investment products to existing SBI customers.

Assets Under Management and Market Position

As of June 2026, SBI AMC remained the largest asset manager in India, managing monthly average assets under management (MAAUM) of approximately Rs 12.7 trillion, which accounted for 15.1 percent of the overall market. Its share in the equity segment stood at 12.1 percent. Centrum noted that equity assets have shown stronger momentum, with equity quarterly average AUM (QAAUM) growing at a compound annual growth rate (CAGR) of 31 percent between fiscal years 2023 and 2026. Overall QAAUM rose at a 21 percent CAGR during the same period, reaching Rs 12.1 trillion.

The brokerage projects overall QAAUM growth to continue at a 14 percent CAGR from FY26 to FY29, reaching nearly Rs 17.9 trillion. Equity QAAUM is expected to grow at a faster pace of 16 percent CAGR, hitting Rs 9 trillion by FY29.

Expansion Beyond Mutual Funds

Centrum also highlighted SBI AMC’s growing footprint in non-mutual fund asset classes such as portfolio management services (PMS), alternative investment funds (AIFs), offshore investments, and the newly introduced specialized investment fund (SIF) segment. SBI AMC operates the country’s largest PMS platform, commanding an estimated 40 percent market share.

In FY26, PMS and advisory QAAUM stood at Rs 16.9 trillion, while AIF QAAUM reached Rs 65.7 billion. The brokerage expects AIF and offshore QAAUM to expand rapidly at a 30 percent CAGR through FY29, while PMS and advisory QAAUM should grow at 12 percent CAGR. Combined non-mutual fund QAAUM is forecast to reach Rs 23.9 trillion by FY29 at a 12 percent CAGR. SIF AUM was around Rs 35 billion as of June 2026.

Non-mutual fund businesses contributed approximately 4 percent of SBI AMC’s operating revenue in FY26, with this proportion expected to remain stable over the next few years.

Retail Investor Growth and B-30 Market Focus

The broker also underscored SBI AMC’s rising exposure to individual investors. Individual MAAUM grew significantly from Rs 631 billion in FY17 to Rs 5.8 trillion in FY26, increasing their share of total MAAUM from 39 percent to 48 percent. The investor base expanded at a 28 percent CAGR, reaching 18 million investors in FY26.

Despite this growth, the folios-per-investor ratio remains relatively low at 1.24x, indicating room for SBI AMC to sell additional investment schemes to existing customers. Additionally, SBI AMC holds a strong position in B-30 markets, where assets account for 23.2 percent of its total MAAUM compared to an industry average of 18.4 percent. The company’s market share in B-30 regions was 18.9 percent as of June 2026.

New systematic investment plan (SIP) registrations in B-30 markets rose from 2.3 million in FY23 to 6.1 million in FY26, representing a 38 percent CAGR, outpacing the 28 percent CAGR in T-30 markets.

Cost Efficiency and Operating Leverage

Centrum pointed out SBI AMC’s cost advantage, with an expense yield of around 8 basis points on QAAUM, lower than peers such as ICICI AMC (15-16 bps) and HDFC AMC (9-12 bps). Operating revenue yield improved from 32 basis points in FY25 to 35 basis points in FY26, while equity revenue yield increased by 3 basis points year-on-year to 59 basis points.

The brokerage expects revenue yields to remain stable through FY29, supported by a growing equity asset share. Operating expense yield is forecast to average 7.5 basis points over FY26-FY29, allowing SBI AMC to benefit from operating leverage as its asset base expands.

Earnings Outlook and Valuation

SBI AMC reported a profit after tax (PAT) of Rs 30.7 billion in FY26, marking a 32 percent CAGR from Rs 13.4 billion in FY23. Centrum projects earnings growth to moderate, with PAT expected to increase at a 13 percent CAGR to Rs 44.3 billion by FY29. Core PAT is forecast to grow at a 15 percent CAGR, reaching Rs 39.5 billion over the same period. Operating revenue, which rose from Rs 21.6 billion in FY23 to Rs 43.9 billion in FY26, is anticipated to grow at a 14.2 percent CAGR to Rs 65.4 billion by FY29.

The brokerage values SBI AMC at 34 times estimated earnings for September 2028, applying a discount relative to larger competitors while recognizing the strength of its franchise and growth prospects. The stock currently trades at 25 times estimated September 2028 earnings.

Potential Risks

Centrum identified several risks that could affect its positive outlook, including slower-than-expected AUM growth, significant equity net outflows, underperformance of investment schemes, and potential regulatory actions impacting total expense ratios (TERs).

Disclosure: This article was authored by Kumar Gaurav, who is not a SEBI-registered research analyst or investment adviser. Neither Gaurav nor their relatives hold any financial interest in the companies mentioned as of the publication date. The views expressed are attributed to the respective SEBI-registered analysts or brokerages and do not reflect the positions of The Economic Times Digital or the journalist. Readers should consult the original research reports and conduct their own evaluations before making investment decisions.