SBI Funds gains 7% in debut after $1 billion India IPO

SBI Funds Management opened its market life on Tuesday at a 7% premium to its initial public offering price of 574 rupees, or $5.96, after raising about $1 billion. The debut was modest relative to the demand for the issue, which attracted 2.97 trillion rupees, or $30.7 billion, of bids, according to Bombay Stock Exchange data.

The IPO was subscribed 41.6 times, with institutional buyers driving much of the demand. In an oversubscribed offering, investors seek more shares than the company or selling shareholders make available, so allocations are scaled back according to the terms set for each investor class.

SBI Funds is a joint venture between State Bank of India and Amundi Group. It is India’s largest asset management company, with 29.5 trillion rupees, or $395 billion, under management as of March, according to its filing with the Securities and Exchange Board of India.

The listing was watched as a test of appetite for large Indian public offerings after a slower first half for deal activity. CNBC has reported that offerings worth $50 billion could come to the Indian equity market this year, including potential large listings such as Jio Platforms and the National Stock Exchange.

IPO market cools from last year

The 7% initial premium placed SBI Funds close to recent Indian IPO performance. KPMG India said in a May report that the average listing gain for Indian IPOs was 8% in the financial year ended March, down from 28% in the previous year.

India has recorded the highest number of IPO listings globally over the past two years, according to CNBC. Activity has since become more subdued as domestic equities have weakened and investors have weighed geopolitical and macroeconomic risks.

CNBC reported that higher energy prices linked to the Iran war have put pressure on India’s economy and affected the country’s domestic consumption narrative. The same period has also seen a global rally in artificial intelligence stocks, a sector in which CNBC said India lacks major listed champions.

Indian equity benchmarks have reflected that pressure. CNBC reported that the Sensex has fallen more than 9% since the start of the year, while the Nifty 50 is down 7.5%, making India one of the weaker large equity markets over that period.

Company sets out retail ambition

At a pre-listing event, Olivier Mariée, head of Amundi’s international partner networks and joint ventures and a member of the SBI Funds board, said the firm should focus on durability. “We should look forward to building a sustainable company which will drive this market going forward,” he said.

Debasish Mishra, managing director and chief executive of SBI Funds Management, described the company’s growth target in broad retail terms. “Our aspiration is to be the fund manager to every Indian,” he said at the event.

The market response leaves SBI Funds with a positive but measured start as a listed company. For policymakers and issuers, the transaction offers a current benchmark for how large Indian offerings are being priced and received in a more selective equity market.

This story draws on original reporting from CNBC.