KFin Technologies, a services and solutions provider to asset managers and corporate issuers across asset classes in India, is the fourth initial public offering (IPO) this month after share sales by Sula Vineyards, Abans Holdings and Landmark Cars.
Here are 10 key things to know before subscribing to the public issue:
1) IPO Dates
The public issue opened for bidding on December 19 and closes on December 21.
2) Price Band
The IPO price band has been fixed at Rs 347-366 per share.
3) IPO size
The share sale will fetch KFin Technologies Rs 1,500 crore, which comprises an offer for sale by its promoter General Atlantic Singapore Fund Pte Ltd.
Of the total IPO size, Rs 675 crore was raised by the company via the anchor book on December 16, a day before the issue opened.
4) Objective of the IPO
The main objective is the Rs 1,500 crore offer for sale launched by the promoter, and achieve the benefits of listing the shares on the stock markets. The company will not receive any proceeds of the sale, and all the money will go to the selling shareholder.
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5) Lot Size
Investors can make a minimum bid for 40 equity shares and in multiples of 40 shares thereafter. Retail investors can make a minimum investment of Rs 14,640 per lot; the maximum investment would be 190, 320 in 13 lots.
6) Investor reservation in IPO
The company has reserved 75 percent of the offer for qualified institutional buyers, 15 percent for high networth individuals, and the remaining 10 percent for retail investors.
7) Company profile and strength
KFin Technologies is a leading technology-driven financial services platform. The company provides services and solutions to the capital markets ecosystem including asset managers and corporate issuers across asset classes in India, according to its share sale prospectus.
It also provides investor solutions including transaction origination and processing for mutual funds and private retirement schemes in Malaysia, the Philippines and Hong Kong.
It is India's largest investor solutions provider to Indian mutual funds, based on the number of Asset Management Companies to which it provided services (24 out of 41 as of September 2022, representing 59 percent of the market).
As of September 2022, it provided services to 301 funds out of 192 asset managers in India, or 30 percent of the market based on Alternative Investment Funds.
It is also the largest issuer solutions provider in India based on the number of clients serviced. It had a 40 percent market share based on the number of mainboard IPOs handled in FY22 and a 29 percent share in the six months ended September 30, 2022.
More than 70 percent of its business came from domestic mutual funds and nearly 12 percent business from the issuer solutions segment in FY22.
As of June 2022, out of the 60 AMCs in Malaysia across wholesale funds, unit trust funds and private retirement schemes, KFin was servicing 18 clients in Malaysia in addition to three in the Philippines and Hong Kong as of September 2022. In addition, it signed up two new AMCs in Malaysia and one in Singapore that were yet to launch operations as of September 2022.
The company has several strengths including a scaled platform with a strong track record of growth and market leadership, diverse multi-asset servicing platform to benefit from growth across large markets in India and South-East Asia, a unique “platform-as-a-service” business model providing end-to-end solutions, and longstanding client relationships with a diversified and expanding client base.
It has an asset-light business model with a recurring revenue model, high operating leverage, profitability and cash generation potential.
8) Financials and promoter
KFin Technologies has turned profitable with a consolidated net income of Rs 148.5 crore for FY22 against a loss of Rs 64.5 crore in the previous year, on strong operating performance and healthy revenue. Consolidated revenue from operations in the same year grew by 33 percent to Rs 639.5 crore compared to the previous year.
Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)in the financial year 2021-22 grew by 35.5 percent to Rs 287.8 crore and the margin expanded by 90 basis points to 45 percent compared to the previous year. One basis point is one hundredth of a percentage point.
Return on equity for the year was around 23 percent against a negative ROE of nearly 19 percent in the previous year. Return on capital employed nearly doubled to around 31 percent in FY22.
In the six months ended September 2022, the company recorded a 26 percent year-on-year increase in profit to Rs 85 crore, supported by low finance costs and higher revenue. Revenue from operations, at Rs 349 crore, increased by 20 percent compared to the same period last year. At the operating level, EBITDA grew by just 2.6 percent to Rs 133.5 crore, but the margin narrowed by 6.5 percentage points to 38.27 percent compared to the year-ago period.
Total promoter shareholding in the company stands at 74.37 percent as of now, including 72.51 percent owned by General Atlantic Singapore Fund. After the issue, its shareholding will be reduced to 49.91 percent.
Among public shareholders, Compar Estates and Agencies has a 10.86 percent stake in the company and 9.86 percent is held by Kotak Mahindra Bank.
KFin has an experienced management team, backed by a strong board and marquee shareholders. Vishwanathan Mavila Nair, the Chairman & Non–Executive Director on the board, has 48 years of experience in financial services and advising fintech start-ups. Venkata Satya Naga Sreekanth Nadella is the Managing Director and Chief Executive Officer of the company.
Nadella has over 20 years of experience. He was previously associated with Accenture Services as Managing Director, IBM Global Services India as Transformation Manager, Capita Offshore Services as Transition Manager, Callhealth Services as Chief Operating Officer and Indian School of Business as Finance Manager.
9) Risks and concerns
Here are key risks and concerns highlighted by Anand Rathi and Angel One:
a) Significant disruptions in information technology systems or breaches of data security could adversely affect the business and its reputation.
b) A decline in the growth, value, and composition of Assets Under Management of the mutual funds managed by clients may adversely impact the average revenue earned from and may have a significant adverse impact on future revenue and profit.
c) The company is subject to periodic inspections by the Securities and Exchange Board of India and the Pension Fund Regulatory and Development Authority (PFRDA). Non-compliance with observations made by the regulators during these inspections could expose it to penalties and restrictions.
d) Competition could negatively affect the company’s ability to maintain or increase its market share and profitability.
e) KFin is subject to extensive government regulation and if the company fails to obtain, maintains or renews its statutory and regulatory licenses, permits and approvals required to operate its business, its operations may be adversely affected.
10) Allotment and Listing Dates
The IPO share allotment will be finalised by December 26. Unsuccessful investors will get refunds in their bank accounts by December 27 and equity shares will be transferred to eligible investors by December 28.
KFin Technologies will make its debut on the BSE and NSE on December 29.
ICICI Securities, Kotak Mahindra Capital Company, JP Morgan India, IIFL Securities, and Jefferies India are the merchant bankers to the issue. Bigshare Services is the registrar.
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