Last week, SBI Mutual Fund, India’s largest fund house by assets under management (AUM), completed an exercise which typified what the Indian financial sector values it for. SBI Funds Management—the asset management company (AMC) of SBI Mutual Fund—completed the mandate of liquidation of securities of six wound-up Franklin Templeton mutual fund schemes, directed by the Supreme Court in 2021.
In 2020, Franklin Templeton Mutual Fund had cited unprecedented redemption pressures, leading up to a freeze by the regulator Securities and Exchange Board of India (Sebi), after finding serious lapses and a breach of its mutual fund guidelines.
SBI Fund Management liquidated 217 securities and disbursed around Rs27,508 crore which constituted 109 percent of the value of the securities as on date of winding up. “We have done it in a judicious way without hitting the liquidity in any of the segments or products. There had to be someone who could take care of the issue," Shamsher Singh, managing director and CEO of SBI Mutual Fund, tells Forbes India. Singh, on deputation from parent State Bank of India, is a veteran SBI banker with over 32 years of experience.
SBI MF holds the top position with average assets under management (AAUM) of around Rs8 lakh crore ($98.5 billion) from an industry total of Rs46 lakh crore, which works out to an AUM market share of just under 18 percent (see infographic).
While private sector mutual funds, from ICICI Prudential AMC, HDFC AMC to Nippon Life and Edelweiss AMC, have grown in size and mutual fund distributors have aggressively sold their schemes, particularly through systematic investment plans (SIPs) in the past two decades, SBI MF has been able to occupy leadership position thanks to the parentage, managing the EPFO money and adoption of technology. SBI MF today covers 95 percent of the PIN codes in India.
In the three years to March 2023, SBI MF has also taken advantage of being a fund manager to manage inflows from the Employees’ Provident Fund Organisation (EPFO)—alongside UTI AMC—and channelise the EPFO money largely towards debt and the balance towards equity products.
But if one were to exclude the EFPO money, private mutual funds such as ICICI Prudential AMC and HDFC AMC would appear to be serious competitors, analysts say.
HDFC, Nippon Life India, Aditya Birla Sun Life and UTI are the listed AMCs in India. SBI MF remains unlisted, but has found strong demand in the unlisted market.
“We see a lot of demand and less supply for the shares. There are not too many sellers at the moment. The only sellers coming forward are those who might want to liquidate a small portion of their unlisted portfolio," says Krishna Raghavan, CEO of Unlistedkart, market-making and research platform for unlisted stocks, and part of Qapita group. Qapita is a SaaS- platform focussed on equity and transaction management for the private market.
The SBI MF stock is now quoting close to Rs1,050, having started at Rs975. SBI has a 62.5 percent stake in SBI Funds Management. Thirty-seven percent is held by European asset manager Amundi, through Amundi India Holding, a wholly-owned subsidiary, while a small portion is the employee stocks pool.
The demand for the unlisted SBI MF is from investors who bet that the fund house will continue to remain one of the most trusted brands in India in the coming years and that the financial sector will continue to expand over the next two decades.
The SBI MF leadership is confident that the growth momentum will sustain in the coming months. “Corporate and financial institutions’ balance sheets are comfortably placed. The growth path is strong. We are at the fag end of the interest rate hike cycle. We might see a 25 basis points hike in the coming months, depending on how inflation levels out over the next two to three months… but it is not a matter of great worry," adds Shamsher Singh.
Both Shamsher Singh and DP Singh are confident that SBI MF should be able to touch its next realistic AUM target of Rs10 lakh crore (Rs10 trillion). “We see this as a reality, provided the market behaves," Shamsher Singh said humorously.
DP Singh finds the lack of knowledge among intermediaries and keeping them upskilled as a challenge ahead. From an equity market perspective, the risk appetite of the newest investors is “fragile". “People have not seen the downside, so any correction could cause concerns for them," he said.
SBI MF, due to its leadership position, can continue to achieve scale as distribution continues aggressively. “The scale, the reach and the brand presence that SBI MF can utilise cannot be duplicated in the foreseeable future. The only question is how well the fund house leverages that and how far they go with it," says Dhirendra Kumar, founder and CEO of Value Research, an independent investment research firm.
Being the market leader in selling a retail savings product means it’s a given that they should set the rules of the game.
The parent SBI will need to identify leaders who can take SBI MF to the next level. After all, the bank has hadsuccess in creating and executing the digital banking platform YONO.
"To realise its true potential, the industry needs a visionary leader who can make mutual funds the default choice for all Indians. ," Kumar said.
First Published: Aug 31, 2023, 11:19
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