Citi, JPMorgan Opt Out Of $1.4 Billion SBI Funds IPO On Low Fees
Major Wall Street banks Citigroup and JPMorgan withdrew from SBI Funds Management's planned $1.4 billion IPO over fee disputes, with shareholders offering just 0.01% compared to industry average of 1.86%. The joint venture between State Bank of India and Amundi SA plans to sell 10% stake, valuing the company at $14 billion amid India's record-breaking IPO market activity.
*this image is generated using AI for illustrative purposes only.
Major Wall Street banks have stepped back from one of India's largest planned initial public offerings, highlighting the growing tension between international advisory standards and domestic fee structures in the country's booming capital markets.
Banks Exit Over Fee Disputes
Citigroup Inc., initially part of the mandated advisers for SBI Funds Management's planned $1.4 billion IPO, withdrew from the transaction over fee disagreements. The bank was subsequently replaced by Jefferies Financial Group. Similarly, JPMorgan Chase & Co. decided not to pursue the mandate after pitching, citing comparable concerns about compensation levels.
Shareholders selling in the IPO offered fees of about 0.01% of the issue size, which bankers called rock bottom, after some domestic advisers quoted only a token fee for the mandate. The fee structure comparison reveals the significant gap:
| Fee Comparison: | Rate |
|---|---|
| SBI Funds IPO Offer: | 0.01% of issue size |
| Industry Average (Latest): | 1.86% of issue size |
| Industry Average (Previous): | 1.67% of issue size |
Current Advisory Lineup
Despite the departures, the IPO has assembled a substantial roster of advisers, primarily comprising domestic and regional banks. Kotak Mahindra Capital Co., Axis Bank Ltd., SBI Capital Markets Ltd., Motilal Oswal Investment Advisors Ltd., ICICI Securities Ltd. and JM Financial Ltd. were picked to work on the IPO, along with local units of HSBC Holdings Plc and Bank of America Corp.
Government-Linked Deal Pattern
The low fee structure reflects a broader pattern in government-associated transactions in India. When State Bank of India raised ₹25,000 crores ($2.8 billion) through a share sale in July, it reportedly paid six bankers just ₹1 each. In such deals, banks often accept symbolic fees as they vie for prestige, league-table credit and long-term relationships with major state-owned entities.
IPO Structure and Valuation
SBI Funds Management operates as a joint venture between State Bank of India and France's Amundi SA. The partners announced plans to sell a combined 10% stake through the public offering. The offering could raise about $1.4 billion, valuing the company at approximately $14 billion.
| Transaction Details: | Specifications |
|---|---|
| Issue Size: | $1.4 billion |
| Stake Being Sold: | 10% combined |
| Implied Valuation: | $14 billion |
| Joint Owners: | State Bank of India & Amundi SA |
Market Context
India was among the world's busiest markets for new listings, with companies raising about $22 billion, surpassing the previous year's record of roughly $21 billion, according to data compiled by Bloomberg. This exceptional activity underscores the significance of the SBI Funds Management transaction in the current market environment.
Deliberations on the offering continue, and transaction terms could still evolve before the final launch. State Bank of India, SBI Funds Management and Citigroup didn't respond to requests for comment, while Amundi and JPMorgan declined to comment on the matter.
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