SBI to offload 6% stake in MF arm via OFS

Mumbai: India's largest lender, State Bank of India (SBI), is all set for the Offer For Sale (OFS) of its mutual fund (MF) arm in the first quarter of the next fiscal. The SBI Mutual Fund business, which is the largest fund house in the country at present, would be the fourth such listing, joining recently listed Aditya Birla AMC, UTI AMC, HDFC AMC and Nippon Life AMC.

At present, SBI and SBI MF both are well capitalised and hence they don't need capital. The idea behind the forthcoming OFS route was to make its retail investors part of the growth story. Also, it will help know the value of the enterprise.

Talking to Bizz Buzz, Ashwini Kumar Tewari, Managing Director, State Bank of India, said: "We don't need capital from the bank's mutual fund arm as we are well capitalised. Similarly, SBI MF also doesn't need capital. Our partner Amundi wants to stay invested." SBI's foreign partner into the venture, Amundi, will be shedding its four per cent stake through the forthcoming OFS. In fact, OFS is slightly different from normal IPO route as in OFS, the promoter dilutes its stake, rather than the company itself.

"The Executive Committee of Central Board of the Bank has accorded approval for exploring possibilities to offload six per cent stake of the bank in SBI Funds Management Limited through IPO route, subject to receipt of all regulatory approvals," the lender had informed in a regulatory filing on December 15.

According to Tewari, "we're listing as being the number one mutual fund house in the country, it's fair that the market is able to participate in this stock which will create value for investors."

On valuation, he said that there are standard techniques linked to AUM and EBDITA, but as part of the listing process we will get the valuation done.

Talking about the timing for the listing, Tewari said: "As to timing, we would go through the process and once we are ready and have the regulatory approvals, we will see at the market. With our brand and performance, we are hopeful of a good response."

As of now, SBI holds 63 per cent stake in SBI MF, whereas its foreign partner Amundi holds 37 per cent. Authorised capital of SBI MF currently stands at Rs 52.50 crore, whereas its paid-up capital is Rs50 cr. DP Singh, Executive Director, SBI MF, said: "After becoming the leader in Indian MF industry, it becomes a natural aspiration to know the value of the enterprise. Offer price and dates will be finalized based on the market conditions and Sebi approval."

Normally, OFS is brought for two purposes. First, when the parent company wants to boost its capital. In this case, it would sell part of its non-core business. In another case, the parent organization plans to book profit by selling a part of its stake. As of now, SBI MF's size is at Rs 6.34 lakh crore as on November 30. Keeping that in view, a rough estimate says that the size of the SBI MF's OFS will be at around Rs5,000-6,000 crore.

Being a strong brand, SBI MF already enjoys its value in the market. However, the mandate given by Supreme Court to the fund house in February last year to oversee winding up of Franklin Templeton's wound-up debt schemes will give a further boost to the investors' confidence, experts opine.

In the meantime, SBI MF is also likely to come up with its NFO for a multi-cap fund in February.

Value For Investors

♦ SBI MF's size is at Rs 6.34 lakh crore

♦ Rough estimate puts OFS size at Rs6,000 cr

♦ OFS price and dates will be finalized subject to mkt conditions

♦ SBI holds 63% in MF arm

♦ Its foreign partner Amundi has 37% stake

♦ Amundi will offer its 4% stake through OFS

♦ SBI board okayed offloading 6% in MF arm