Newly listed SBI Funds gets three Buy initiations with targets as high as ₹720

Why Three Brokerages Just Initiated Buy Ratings on SBI Funds

Three global and domestic brokerages have begun formal coverage of SBI Funds Management Ltd, the newly listed asset management arm backed by State Bank of India, and all three have opened with Buy recommendations. BofA Securities set a target of ₹685, HSBC set ₹660, and Motilal Oswal Financial Services set ₹720. From Friday's close of ₹563.80, those targets imply roughly 21.5%, 17% and 28% upside respectively.

The common thread in the initiations is the company's ownership: SBI Funds Management sits inside India's largest bank's distribution network, which the brokers argue gives it an advantage in reaching smaller cities and first-time mutual fund investors. BofA specifically calls out the firm's leadership in B-30 markets—areas outside India's top 30 cities—as a route into the next leg of retail participation in equity markets.

On Monday the shares rose as much as 2% and were trading around ₹571.55, a gain of about 1.4%. That still leaves the stock just below its initial public offering price of ₹574, which matters because the new Buy ratings are effectively arguing that the market has not yet priced in the company's long-term earnings potential.

What the BofA, HSBC and Motilal Targets Actually Assume

What BofA's ₹685 target assumes

BofA's thesis rests on three pillars: structural market growth, SBI's distribution strength, and profitability improvement from a low-cost platform with operating leverage. Its target is not based on a one-year repricing alone; it expects blended yields to rise as the share of equity assets increases and the alternative investments business scales. The important qualification is that this depends on execution—if yields do not improve, the upside case weakens.

HSBC's 17% EPS growth path

HSBC is the most conservative of the three on price, but it is still constructive. Its ₹660 target assumes earnings per share will compound at 17% annually from FY26 through FY29, supported by better yield management, a larger non-mutual-fund AUM base and operating leverage. HSBC also acknowledges a real pressure point: market share losses in assets under management. Its argument is that the distribution network can offset those losses, but that is a contestable assumption rather than a guarantee.

Motilal's bull case stretches to ₹850

Motilal Oswal describes SBI Funds as a high-quality compounding franchise and models a 13% AUM CAGR over FY26-28, 14% revenue CAGR and 16% PAT CAGR. It expects return on equity to stay around 51-52% and the EBITDA margin to move from 79% in FY26 to about 81% by FY28. The brokerage's bull case of ₹850 implies 51% upside from Friday's close, which is the widest spread among the three and underscores how much of the valuation depends on maintaining high margins and growth.

The IPO price is still the reference point

Despite the positive initiations, the stock at ₹571.55 is slightly below its ₹574 IPO price. That means the analysts are not simply chasing momentum; they are making a longer-term argument that the newly listed entity has not yet been fully valued by the market. For existing IPO investors, the buy targets would imply the stock can move beyond its issue price if the growth assumptions materialise.

What SBI Funds Investors Should Watch Next

For investors evaluating the newly listed stock, the brokerage reports translate into a few specific questions rather than a simple buy confirmation:

• Benchmark against the stated targets. BofA's ₹685, HSBC's ₹660 and Motilal's ₹720 targets are all above Friday's close of ₹563.80, but they assume different EPS and margin paths. The gap between HSBC and Motilal's targets is ₹60, or about 9% of the current price, which makes the brokerage debate unusually important.
• Watch the AUM mix, not only total AUM. The bull cases depend on equity penetration and alternative assets increasing blended yields. A quarterly disclosure showing flat or falling equity share would challenge a central assumption behind all three ratings.
• Track whether the stock can hold above ₹574. That IPO price is the immediate sentiment marker; the current price of ₹571.55 is still below it despite the Buy initiations, so a sustained move above the issue price would signal that the market is beginning to price in the brokerage view.
• Use the bull case as a scenario, not a base. Motilal's ₹850 bull case implies 51% upside, but it explicitly requires EBITDA margins to rise and alternative businesses to scale. If the margin expansion stalls, the base-case targets are the more relevant range.