InvestorQ : Is SBI planning an IPO during the fiscal year 2021-22 for some of its subsidiaries?
diksha shah made post

Is SBI planning an IPO during the fiscal year 2021-22 for some of its subsidiaries?

Moii Chavate answered.
1 year ago

At the outset, I don’t think there are any crystallized plans announced. The SBI chairman, Dinesh Khara, had mentioned in one of the interviews about his intent to monetize SBI stake in other group arms like SBI General Insurance and SBI Mutual Fund. The idea was to monetize these stakes and give an idea of the sum of total parts value of SBI.

In a recent interview, the SBI chairman Dinesh Khara had confirmed that the bank would be looking for ways and means to effectively unlock the value of some of units of the bank like SBI Mutual Fund and SBI General Insurance. He had only indicated that it was likely that it could happen in the current financial year. There has been no confirmation of any sort.

You would recollect that SBI Life is already the most profitable and largest life insurer in the private sector and it has been listed for more than 3 years in the stock markets. A more recent listing is SBI Cards, which got listed only in the year 2020 and that manages the credit card and the debit card as well as payment franchise of SBI.

What Khara has indicated is that the time may be opportunity because SBI MF has already taken the lead as the largest Indian mutual fund by assets under management or AUM. In the last few months, SBI MF has also been widening its gap over HDFC MF and ICICI Pru MF, which have been the market drivers for the last many years.

For SBI, a good benchmark would be HDFC MF. Now SBI MF is larger than HDFC MF in terms of AUM. Its equity AUM is also substantially more than HDFC MF. Above all, fund performance wise, SBI MF ranks well above HDFC MF in most categories. HDFC MF got robust valuation for its AMC business despite the fund being among the less impressive performers in the market.

That is surely a big room for hope as far as SBI MF is concerned. The logic here is that if the sum of parts of SBI is considered then the overall bank valuation may turn out to be quite different. It is probably undervalued is what Khara is hinting at. For that to happen, the bank will have to give a hint via partial monetization; and MF and general insurance could be on the line.