About the Company
KFin Technologies (KFin) is a leading financial service platform which embraces the use of technology. The company provides services and solutions to asset managers and corporate issuers across asset classes in India. It also provides several investor solutions including transaction origination and processing for mutual funds and private retirement schemes in Malaysia, Philippines and Hong Kong. The company is coming out with an IPO comprising fully OFS of 40.98mn shares, aggregating to Rs15bn. Market cap at higher band is seen at Rs61.3bn.
Largest Investor Solutions Provider
As on Sep '22, KFin is India's largest investor solutions provider to Indian mutual funds, based on several AMC clients serviced. It provides services to 24 out of 41 AMCs in India, representing 59% of the market share based on the number of AMC clients. The company also services 301 funds of 192 asset managers in India. It 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 is one of the two operating central record-keeping agencies (CRAs) for the National Pension System (NPS) in India as on Sep'22. It is one of only two players of scale in India's issuer solutions space where KFin 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, each as on Sep'22.
Diverse Products & Services Base
The company has a diversified portfolio of products and services and operates under: 1. Investor Solutions: Account setup, transaction origination, redemption, brokerage calculations, compliance/regulatory reporting recordkeeping. Domestic mutual funds, international, pension services, alternatives and wealth management. 2. Issuer Solutions: Folio creation and maintenance, transaction processing for IPO, FPO, etc. corporate action processing, compliance/regulatory reporting recordkeeping MIS, virtual voting e-AGM, e-Vault. 3. Global Business Domestic Mutual Services: Mortgage services legal services transfer agency finance and accounting.
Financials in Brief
During FY20-22, its revenue and PAT clocked CAGR of 19% and 437% respectively, while EBITDA margin improved from 35.3% in FY20 to 45% in FY22. The company reported revenue of Rs6.4bn in FY22, up 33% YoY, while EBITDA increased to Rs2.9bn in FY22 from Rs2.1bn in FY21. PAT for FY22 stood Rs1.5bn from net loss of Rs645mn FY21. The company's average debt-to-equity ratio during FY20-22 stood at ~0.6x.
Our View
KFin has transformed business into a financial technology driven platform-as-a-service model. The technology offering enables transaction lifecycle management combined with highly secure data collection, processing and storage. It processed 1.6mn average daily transactions, including 1mn systematic transactions like systematic investment plans ("SIPs") per day and $3.2bn, average daily settlement for domestic mutual funds in six months ended. During FY22 and 1HFY23 it maintained an accuracy rate of above 99.5% of all transactions processed, while adhering to the timelines as stipulated in agreements with clients. Based on FY22 earnings the company is valued at 41.3x P/E, and 9.7x EV/Sales. On positive note, the company is the largest investor solutions provider in India with diverse products and services base, huge market share and international presence. However, ongoing investigations for erstwhile promoters is an overhang. At current valuation, the issue appears fully priced, discounting all near- term positives and risk reward is not favorable.
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