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