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FINTECH’s Q3FY26 performance was impacted by the consolidation of Ascent Fund Services. The company delivered strong ~28% YoY and ~20% QoQ revenue growth at Rs3.7bn (largely in line with our estimate). Reported EBITDA margin of 40.9% was hit by the integration of Ascent which generated low single-digit EBITDA margin. The Domestic MF RTA business saw a ~2% shift in AUM mix toward ETFs and Passives, which led to a 2.6% QoQ decline in revenue yield. Issuer Solutions business saw healthy growth, driven by healthy annuity income and elevated corporate action activity. While Ascent currently generates low single-digit EBITDA margin, the management mentioned that it is EPSaccretive on cash basis. It remains confident about Ascent’s EBITDA margin expanding to company-level margin over the medium-to-long term as the business scales. To bake in Q3 developments, we raise our revenue estimates by ~1-2% and EBITDA margin forecasts by ~10-50bps over FY26-28, driving a ~2-3% increase in EBITDA estimates. We maintain BUY and Dec-26E TP of Rs1,400.

Ascent’s consolidation impacts revenue growth and EBITDA margin During Q3FY26, the company consolidated the books of Ascent Fund Services, which led to ~28% YoY and ~20% QoQ revenue growth – particularly driven by 114% QoQ growth in International and Other Investor Solutions segment. Domestic MF revenue grew ~3% QoQ, despite ~5% growth in AUM – hurt by lower revenue yield on account of increased share of ETFs and passive funds. Issuer solutions business saw strong 13% QoQ growth, driven by seasonally strong corporate action activity and healthy annuity revenue growth. Reported EBITDA margin (ex-labor law impact) at 40.9% saw 300bps QoQ contraction on account of the integration of Ascent, which generates low single-digit margin. PAT at Rs920mn declined ~1% QoQ and missed our estimate by ~5% on account of lower other income and increased depreciation cost.

Non-MF revenue share increases; Ascent to witness upward margin trajectory Driven by the consolidation of Ascent, the company’s consolidated revenue mix changed significantly, with Domestic MF revenue contributing ~60%, down from ~71% in Q3FY25. As a result, the contribution from International business increased to ~17%, up from ~4% in Q3FY25, highlighting the management’s strategic objective of diversification. The management remains confident about expanding Ascent’s EBITDA margin closer to company-level margin over the medium-to-long term. While increased scale would be the primary driver of margin expansion, some synergies with respect to real estate costs, data centers, software licenses, and technological infrastructure would aid the trajectory.

We maintain BUY and Dec-26E TP of Rs1,400 To bake in Q3 developments, we tweak our estimates, leading to a ~1-2% increase in revenue over FY26-28. We raise our EBITDA margin forecasts by ~10-50bps, leading to a ~2-3% increase in EBITDA estimates. However, we lower our PAT estimate by ~1% for FY26 while raising FY27-28E PAT by ~1%, largely owing to the reduction in other income and higher depreciation costs. We maintain BUY and Dec-26E TP of Rs1,400, implying FY28E P/E of 43x

AI as an enabler driving increased productivity Over the past few years, KFINTECH has scaled its businesses, driven by its technological capabilities and domain expertise. While AI would be useful for reducing technology-related development cycle times, the management believes it cannot replicate the decades of domain expertise the company has built over the years. The RTA industry has consolidated over the past few years, from 8 players to 2 players. KFINTECH has achieved scale with profitability, despite compression in yields. As a result, the management believes for a 3rd entrant to emerge (driven by AI capabilities), it would have to offer 30-50% cost optimization to clients, justifying the transition-related risk and thus making it economically unviable. The company has built 2 AI-led platforms for the Issuer Solutions business, targeting the bond market space and investor relation solutions, which are expected to launch in the coming weeks. Using AI-assisted development, the delivery cycle has reduced by 45-50%, from platforms taking 5-6 months to develop to being delivered in ~3 months. The company’s comprehensive AI strategy includes both Generative AI and Agentic AI, and has started to yield some level of comfort in terms of deployment at an organization level.

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