Synopsis : SBI Funds Management, India’s largest asset management company, is preparing for its IPO, but one important detail stands out—it does not own the iconic “SBI” brand. Instead, the AMC operates under a trademark licence agreement with State Bank of India and pays an annual royalty to use the SBI name and logo. With royalty expenses steadily rising as a percentage of total costs, investors should understand how this arrangement could impact margins and what risks the company faces if the licensing agreement changes.
The much-awaited IPO of SBI Funds Management is drawing closer, but one key aspect of the business deserves investor attention. Although it is India’s largest asset management company, SBI Funds Management does not own the rights to the widely recognised "SBI" brand.
Instead, the company operates under a trademark licensing agreement with State Bank of India (SBI), allowing it to use the SBI name and logo in return for royalty payments.
How the Trademark Agreement Works
Under the Trademark License Agreement signed on March 29, 2012, along with a supplementary agreement dated October 15, 2024, State Bank of India has granted SBI Funds Management a non-exclusive and non-transferable licence to use the SBI brand.
The agreement allows the company to:
- Use "SBI" in its corporate and brand identity.
- Display the SBI logo across marketing material, stationery, websites and digital platforms.
- Extend these branding rights to its subsidiaries following the 2024 supplementary agreement.
Royalty Payments Continue to Rise
Using the SBI brand comes at a cost. As per the Draft Red Herring Prospectus (DRHP), SBI Funds Management pays royalty equal to 0.20% of total income or 2% of net profit, whichever is higher.
These payments have steadily increased over the years and now account for a larger share of the company's operating expenses.
| Period | Royalty Paid | % of Total Expenses |
|---|---|---|
| 9MFY26 | Rs 38.15 crore | 5.19% |
| FY25 | Rs 41.26 crore | 4.73% |
| FY24 | Rs 26.62 crore | 3.54% |
| FY23 | Rs 21.41 crore | 3.34% |
The increasing royalty burden is an important factor investors may monitor as it directly impacts operating margins.
Key Risks Investors Should Know
The DRHP also highlights several risks linked to the licensing arrangement.
The trademark agreement can be terminated if SBI Group's shareholding in SBI Funds Management falls below 26%. In addition, SBI retains the contractual right to terminate the agreement by providing the required notice.
Losing access to the SBI brand could significantly affect the company's customer trust, brand recognition and overall business performance.
Another notable concern is that the company's logo itself is not registered under the Trade Marks Act, 1999. Without formal registration, protecting its visual identity against unauthorised usage or infringement may become more challenging.
Ownership Structure
SBI Funds Management operates as a joint venture between State Bank of India and Amundi India Holding.
- SBI holds 61.98%
- Amundi owns 36.40%
The company manages SBI Mutual Fund, India's largest mutual fund house by assets under management.
IPO Details
According to reports, SEBI has approved SBI Funds Management's IPO, which is expected to be valued at nearly Rs 13,000 crore.
The issue will be entirely an Offer for Sale (OFS) comprising up to 20.37 crore equity shares, with no fresh issue component.
Existing shareholders—State Bank of India and Amundi India Holding—will reduce part of their holdings through the public offering.
Disclaimer : This article is intended solely for informational and educational purposes and should not be considered investment, financial, or legal advice. IPO investments involve market risks, and company fundamentals, valuations, and regulatory developments may affect future performance. Investors should carefully read the Draft Red Herring Prospectus (DRHP) and consult a SEBI-registered investment advisor before making any investment decisions.
.jpg)
