SBI Funds IPO pays 0.05% fee, extending state-led trend
Investment banks guiding the SBI Funds IPO will receive just 0.05% of the deal value, a record low that underscores how state-backed Indian issuers are squeezing Wall Street margins to secure prestige mandates.
SBI Funds, India’s largest asset manager, will pay its investment banking syndicate 46.25 million rupees ($479,000) for managing its public offering. This represents a fee of just 0.05% of the total deal value. The joint venture between State Bank of India Ltd. and France’s Amundi SA disclosed the compensation in a regulatory filing.
The compensation is roughly 97.5% lower than what rival ICICI Prudential Asset Management Co. paid investment banks on a similarly sized offering in 2025. That transaction saw banks collect 1.88 billion rupees ($19.5 million), equating to a 1.8% fee. While SBI Funds estimates its total issue-related expenses at 1.13 billion rupees, or 1.16% of the offer size, the allocation going directly to the underwriters is remarkably small.
The aggressive pricing prompted several major Wall Street institutions to sit out the transaction entirely. Citigroup Inc. and JPMorgan Chase & Co. declined to pursue roles on the listing because of the unusually low fees, according to people familiar with the situation. Their absence highlights a growing tension between global banks' fee expectations and the pricing power of Indian state entities.
The SBI Funds listing is the latest example of Indian state-owned companies leveraging their size to drive down capital markets costs. When State Bank of India raised 250 billion rupees through a qualified institutional placement last July, it paid six investment banks a symbolic one rupee each. The debut of Life Insurance Corporation Ltd. similarly saw banks collect just 118 million rupees, or 0.06% of the 205.6 billion rupees raised, according to Prime Database.
Despite the poor immediate economics, these mandates remain highly sought after by banks aiming to build relationships with the country's most prolific issuers. “For ‘marquee transactions involving state-owned enterprises and their subsidiaries, banks are often willing to sacrifice economics for league table credit, prestige and long-term client relationships,” said Pranav Haldea, managing director of Prime Database Group. “This mandate seems to have followed a familiar pattern of aggressive fee compression.”
Securing a role on a flagship state-backed offering can serve as a gateway to more lucrative advisory and capital-markets assignments down the line. For international investors, however, the dynamic signals that India's state sector remains a market where traditional Western underwriting margins rarely apply.
