About the company:
About the company:
Incorporated in 2017, KFin
Technologies Ltd (KFINT) is a technology-driven financial services platform.
The company offers services and solutions to AMCs and corporate issuers across
asset classes in India, Malaysia, the Philippines, and Hong Kong. The company’s
clients can be broadly bifurcated into four parts – 1. Mutual fund companies 2.
Registrar to IPOs 3. Listed corporates & 4. Central record keeping agency
for National Pension scheme.
Key strengths:
An asset-light business model
with a recurring revenue model, high operating leverage, profitability, and
cash generation
KFINT operates an attractive
business model with a demonstrated track record of consistent profitability and
returns while operating an asset-light model which has previously generated a
strong free cash flow.
A diverse multi-asset
servicing platform is well-positioned to benefit from strong growth across
large markets in India and South-East Asia
KFINT operates in multiple large
markets across several financial asset classes in India, Hong Kong, Malaysia,
and the Philippines. This has allowed the company to grow as a regional
business and not just as an India-focused business. KFINT’s market leadership
in India and client relationships provide them with the platform to benefit
from this anticipated growth in the Indian economy.
Deeply entrenched,
long-standing client relationships with a diversified and expanding client base
Due to the comprehensive nature
of its platform and the reliance of its clients to source end-to-end services,
KFINT is integral to its client’s business and operations, resulting in
long-term engagement with limited client churn.
Investing in technology
solutions and product innovation
KFINT has comprehensive product
platform solutions built on technology. The company has a dedicated team of 520
employees focused on developing technology and innovative solutions. They
intend to develop a co-innovation laboratory with key industry players in ETF
and index funds to drive research and development in this area.
Key Risks:
The erstwhile promoters are
subject to ongoing investigations by enforcement agencies, including ED, the
Ministry of Finance, and the Government of India. The outcome of such
investigations may adversely impact the company and its business performance.
A decline in the growth, value,
or proposition of AAUM of the mutual funds managed by the company’s clients may
adversely impact the average revenue earned from mutual funds.
Concluding remarks:
General Atlantic Singapore fund
(GASF) is the promoter of Kfin technologies and holds 74.4% of the company. The
GASF is selling a partial stake in this public issue and post the issue their
shareholding would come to 49.9%. At the upper price band of INR 366 per share,
the P/E multiple of Kfintech comes at 36x. The P/E multiple of its closet peer CAMS
(leader in this industry) stands at 39.2x. Considering the company’s financials
the valuation appears on a little higher side. However, the Industry in which
the company operates has been growing at a healthy pace. The Industry AUM in
the past seven years has been clocking a CAGR growth of 15% and this momentum
is expected to sustain. The trend of financialization of savings, growth in
capital markets, and Equity AUM will bode well for the company. Considering these
factors, we ascribe a subscribe rating to this IPO.
Financial Snapshot
|
Particulars
|
Mar-20
|
Mar-21
|
Mar-22
|
|
AAUM Serviced (INR bn)
|
7,233.34
|
9,105.12
|
11,970.29
|
|
YoY growth %
|
|
25.9%
|
31.5%
|
|
Revenue from Operations (INR cr)
|
449.87
|
481.14
|
639.51
|
|
YoY growth %
|
|
7%
|
32.9%
|
|
EBITDA
|
164.02
|
217.45
|
293.91
|
|
YoY growth %
|
|
32.6%
|
35.2%
|
|
EBITDA Margin %
|
36.03%
|
44.72%
|
45.53%
|
|
Net Profit (INR cr)
|
4.52
|
-64.51
|
148.55
|
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