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

SBI Funds Management started trading Tuesday at 7% above its initial public offering price, a positive but restrained debut for India’s largest asset manager. For everyday investors watching India’s IPO market, the listing was a test of how much demand remains for big new stock offerings after a weaker first half for local equities.

The shares listed at a premium to the IPO price of 574 rupees, or $5.96, per share, according to CNBC. A listing premium is the gap between the IPO price and the first traded price on the exchange. A higher premium usually signals that investors were willing to pay more than the offer price once trading began.

SBI Funds is a joint venture between State Bank of India and Europe’s Amundi Group. The company raised about $1 billion in its IPO, while the sale attracted bids worth 2.97 trillion rupees, or about $30.7 billion, according to BSE data cited by CNBC. That made the issue 41.6 times oversubscribed, meaning investors sought far more shares than were available.

The heavy bidding came largely from institutional investors, CNBC reported. Even so, the first-day move fell short of expectations for a more forceful debut, especially given the scale of demand during the offering period.

The broader market backdrop helps explain the reaction. Indian IPOs listed at an average premium of 8% in the financial year ended March, down from 28% a year earlier, according to a May report from KPMG India cited by CNBC. That drop shows that investors have become more selective about paying up for newly listed companies.

SBI Funds’ debut was being watched because India may see more large listings. CNBC reported that investors were looking to the deal for clues about appetite for potential offerings from Jio Platforms and the National Stock Exchange. Stock market offerings worth $50 billion could come to Indian markets this year, CNBC reported, though the Iran war remains a risk.

SBI Funds had 29.5 trillion rupees, or $395 billion, in assets under management as of March, according to a filing with the Securities and Exchange Board of India. Assets under management refers to the value of money a fund company manages for clients across products such as mutual funds.

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 focus should be on building a sustainable company that can help drive the market. Debasish Mishra, SBI Funds’ managing director and chief executive, said the company’s aspiration is to be “the fund manager to every Indian,” according to CNBC.

India has recorded the highest number of IPO listings globally over the past two years, CNBC reported, but activity slowed in the first half of the year. CNBC also reported that higher energy prices linked to the Iran war have pressured India’s economy, while global investors have been drawn toward AI stocks, an area where India has no major public-market leader.

Indian benchmarks have also struggled this year. Since the start of the year, the Sensex has fallen more than 9%, while the Nifty 50 is down 7.5%, according to CNBC.

This story draws on original reporting from CNBC.