In a significant development within India's bustling capital markets, several major global investment banks have withdrawn from advisory roles in the upcoming $1.4 billion initial public offering (IPO) of SBI Funds Management Ltd. The primary reason cited is the exceptionally low fees being offered, which bankers have described as 'rock bottom'.
The Fee War That Drove Banks Away
Citigroup Inc., which was initially selected as an adviser, decided to pull out of the transaction specifically due to the fee structure, according to sources familiar with the private discussions. The bank was subsequently replaced by Jefferies Financial Group. In a similar move, JPMorgan Chase & Co. also chose not to pursue the mandate after its initial pitch, driven by the same concerns over compensation.
The shareholders selling stakes in the IPO—State Bank of India (SBI) and France's Amundi SA—proposed fees of approximately 0.01% of the issue size. This figure becomes stark when compared to industry averages. Data from LSEG reveals that companies paid an average fee of 1.86% of the issue size last year, which was itself an increase from 1.67% in 2024.
The ultra-low fee offer was reportedly triggered after some domestic advisers quoted only a token fee to secure the prestigious mandate, setting a challenging precedent for international banks accustomed to higher compensation.
The Winning Syndicate and a Pattern of Low Fees
Despite the walkout by some global players, a syndicate of banks has been finalized to work on the landmark offering. The appointed advisers include Kotak Mahindra Capital Co., Axis Bank Ltd., SBI Capital Markets Ltd., Motilal Oswal Investment Advisors Ltd., ICICI Securities Ltd., and JM Financial Ltd. They will be joined by the local units of Citigroup, HSBC Holdings Plc, and Bank of America Corp.
This incident is not an isolated one but reflects a broader trend in government-linked financial transactions in India. A notable precedent occurred in July, when the State Bank of India raised 250 billion rupees ($2.8 billion) through a share sale. For that deal, the bank paid its six advisers a symbolic fee of just one rupee each, as reported by local media. In such high-profile deals, banks often accept minimal fees to gain prestige, improve their league table standings, and foster long-term relationships with key state-owned entities.
IPO Details and Market Context
SBI Funds Management, a joint venture between SBI and Amundi, is planning an IPO where the partners will sell a combined 10% stake. The offering is expected to raise about $1.4 billion, which would value the asset management company at roughly $14 billion.
This move comes amid a record-breaking period for India's IPO market. In 2025, India stood as one of the world's busiest markets for new listings. Companies raised approximately $22 billion, surpassing the previous year's record of about $21 billion, according to data compiled by Bloomberg.
While SBI Funds Management, State Bank of India, and Citigroup did not respond to requests for comment, and Amundi and JPMorgan declined to comment, sources indicate that deliberations are ongoing and the terms of the offering could still be subject to change.
