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Salient features of the IPO:

• Financial services platform KFin Technologies Ltd. (KFin), is coming up with an IPO to raise Rs. 1,500cr, which opens on 19th Dec. and closes on 21st Dec. 2022. The price band is Rs. 347 - 366 per share.

• The IPO only consists of OFS portion, thus the company will not receive any proceeds from the issue.

• One of the promoter group entities is participating in the OFS issue and offloading 4.098cr shares. Post-IPO, the promoter group stake will be at 49.91%, compared to pre-IPO stake of 74.37%.

Key competitive strengths:

• Scaled platform with strong track record of growth and market leadership

• Diverse multi-asset servicing platform, well-positioned to benefit from strong growth across large markets in India and South East Asia

• Unique “platform-as-a-service” business model providing comprehensive end-to-end solutions enabled by technology solutions developed inhouse

• Deeply entrenched, long-standing client relationships with a diversified and expanding client base

• Asset-light business model with recurring revenue model, high operating leverage, profitability and cash generation

• Experienced management team, backed by a strong board and marquee shareholders, along with strong culture of compliance

Risk and concerns:

• Unfavorable government policies & regulations

• Subdued economic growth and poor financial investment market

• Unfavorable change in the mutual fund AUM composition

• Consolidation in the mutual fund industry

• Unfavorable forex rate movements

• Difficulty in maintaining the profitability

• Competition

Below are the key highlights of the company:

• According to the RHP, the average asset under management (AUM) of the Indian mutual funds grew by 15% CAGR between Mar. 2017 and Sept. 2022. It is further projected to grow by 14% CAGR over FY22-27. The Alternate Investment Fund (AIF) segment is estimated to grow at 27- 29% CAGR, while the wealth management market is projected to grow at 12-14% CAGR. The AUM under the National Pension System Trust (NPS) is expected to grow by 18-19% CAGR between FY22-27.

• KFin is a leading technology driven financial services platform providing comprehensive services & solutions to the capital markets ecosystem including asset managers and corporate issuers across asset classes in India. It also provides several investor solutions including transaction origination & processing for mutual funds and private retirement schemes in Malaysia, Philippines and Hong Kong.

• The company has adopted a platform driven product design and delivery approach to service the varied needs of its clients. It has an end-to-end transaction management platform across multiple asset classes such as mutual fund, direct stock investments, AIFs, wealth and pension across the operating regions.

• The company is among the two leading Registrar & Share Transfer Agents (RTA) service providers in India. As of 30th Sept. 2022, it provided services to 24 out of 41 asset management companies (AMC) in India, i.e. 59% market share in terms of clientele. Additionally, KFin is mandated by two AMCs, namely, Bajaj Finserv and Frontline Capital Services (both are yet to commence operations) for their RTA services. Of the total AUM of the mutual funds in India, the company serviced 32% of the AUM. Further, KFin has expanded its market share in the Equity AUM of the mutual funds from 29% in FY20 to 35% by Sept. 2022. Moreover, the company’s share in monthly SIP inflows stood at 42%.

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