KFin Technologies Limited incorporated on June 8, 2017, is a leading technology-driven financial services platform providing comprehensive services and solutions to the capital markets ecosystem including asset managers and corporate issuers across asset classes in India and provide several investor solutions including transaction origination and processing for mutual funds and private retirement schemes in Malaysia, Philippines and Hong Kong. It is also India’s largest investor solutions provider to Indian mutual funds, based on the number of AMC clients serviced, as on September 30, 2022. KFin Technologies Limited is the only investor and issuer solutions provider in India that offers services to asset managers such as mutual funds, alternative investment funds (“AIFs”), wealth managers, and pension as well as corporate issuers in India. KFin Technologies Limited is one of the two operating central record-keeping agencies (“CRAs”) for the National Pension System (” NPS”) in India as on September 30, 2022.
The Company is one of only two players of scale in India’s issuer solutions space where it holds a 46% market share based on the market capitalization of NSE 500 companies and a 37% market share based on the number of clients serviced within NSE 500 companies. They are providing services to 24 out of 41 AMCs in India.
Promoters & Shareholding:
General Atlantic Singapore Fund Private Ltd. is the company promoter.
| Pre Issue Share Holding | 74.37% |
| Post Issue Share Holding | 49.91% |
Also read : Debt Mutual Funds – Types, Taxation, Indexation benefit, Risk and suitability
Public Issue Details:
Offer for sale: OFS of approx. 40,983,607 equity shares at Rs. 10, aggregating up to Rs. 1,500 Cr.
Total IPO Size: Rs. 1,500 Cr.
Price band: Rs. 347 – Rs. 366.
Objective: To carry out OFS and to achieve the benefits of listing on the stock exchange.
Bid qty: minimum of 40 shares (1 lot) for Rs. 14,640 and maximum of 13 lots.
Offer period: 19th Dec 2022 – 21st Dec 2022.
Date of listing: 29th Dec 2022.
Pros:
- The company has a scaled platform with a strong track record of growth and market leadership.
- It is also India’s largest investor solutions provider to Indian mutual funds, based on number of AMC clients serviced.
- The company’s diverse multi-asset servicing platform is well-positioned to benefit from strong growth across large markets in India and Southeast Asia.
- The company has deeply entrenched, long-standing client relationships with a diversified and expanding client base.
- Professional and experienced management team.
Risks:
- The company derives a significant portion of its revenues from a few customers.
- The company is subject to periodic inspections by the SEBI and the PFRDA, according to its registration as RTA and CRA respectively.
- Significant disruptions in its information technology systems or breaches of data security could adversely affect it’s business and reputation.
Subscribe or avoid?
Sectorial outlook – The Indian mutual fund industry started with the passing of an act for the formation of the Unit Trust of India (“UTI”), a joint initiative of the Government of India and the RBI in the calendar year 1963. In the calendar year 1987, other public sector banks entered the mutual fund space and in the calendar year 1993, the industry was opened to the private sector. The aggregate AUM of the Indian mutual fund industry has grown at a healthy pace over the past 10 years, against the backdrop of an expanding domestic economy, robust inflows, and rising investor participation, particularly from individual investors. Average AUM grew at a CAGR of 18% to Rs. 39.05 trillion as of September 30, 2022, from Rs. 6.65 trillion as of March 31, 2012. Between Fiscal 2014 and Fiscal 2021, the net financial savings increased at a CAGR of approximately 15.7% as compared to approximately 5.4% for saving in physical assets during the same period. This led to a decline in household savings in physical assets from 62% in Fiscal 2014 to 47% in Fiscal 2021. During the same period, financial savings grew from 36% to 52%. Along with an increase in financial literacy, the relative out performance of financial assets over recent years, and the Indian government’s efforts to fight the shadow economy, It is expected that the share of financial assets as a proportion of net household savings is going to increase over the next five years. The rise in financial assets is expected to further boost financial investments under mutual funds (“MFs”), equity, pension schemes, insurance, and alternate assets.
The financials (revenue and net profit) are shown in the graph below:
Valuation – For the last 3 years average EPS is Rs. 1.78 and the P/E is around 204x on the upper price band of Rs. 366. The EPS for FY22 is Rs. 9.36 and the P/E is around 39x. If we annualize Q2-FY23 EPS of Rs. 5.5, P/E is around 36.2x. It has Computer Age Management Services Ltd (39.37x) as its listed peer as per the RHP. The company P/E is between 36x and 204x. The revenues, net margins, and EPS have been growing consistently in the last few quarters. Looking at the valuation, it seems to be a little expensive.
Recommendation – The company provides comprehensive solutions to asset managers and corporate issuers across asset classes in India and provides several investor solutions including transaction origination and processing for mutual funds and private retirement schemes it also has a high market share in its industry. After considering all the factors the listing seems to be a little expensive with it with great prospects but they are facing some legal proceedings currently and since it is not listed in a discount we would recommend hold off on the subscription for now, keep an eye out on its valuations and ‘buy on dips‘ if it looks attractive.
Disclaimer:
This article should not be construed as investment advice, please consult your Investment Adviser before making any investment decision.
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Also Read: Market Outlook Dec’22
