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KFin Technologies IPO  Fundamental Analysis

Kfintech IPO Limited IPO Review

  • Kfintech is a leading technology driven financial services platform providing comprehensive services and solutions to the capital markets ecosystem including asset managers and corporate issuers across asset classes in India and provide several investor solutions including transaction origination and processing for mutual funds and private retirement schemes in Malaysia, Philippines and Hong Kong.
  • Issuer Services (Registrar and Transfer Agents, RTA) - Provides registrar services in India serving nearly 600 listed companies and 3000+unlisted companies. It had a 40% and 29% market share based on number of mainboard IPOs handled in FY22 and 6MFY23 respectively.
  • Pension management Services (PMS) - KFintech is one of the two players providing central recordkeeping services (CRA) for the National Pension System in India.
  • Alternative Investment Fund Services- Serves over 300 AIF schemes launched by 100+ fund managers.
  • Global services- As on June 30, 2022, it is servicing 18 AMC clients in Malaysia and three clients in Philippines and Hong Kong as on Sept. 30, 2022. In addition, it has signed two new AMCs in Malaysia and one AMC in Singapore that are yet to launch operations as on Sept 30, 2022.

Financial Review

KFintech posted total revenues of Rs 353.76 crore for H1FY23 and PAT of Rs 85.35 crore for the same period. For FY22, income from operations increased by 33% to Rs 645.56 crore from Rs 486.20 crore in. The Issuer earned PAT of Rs 148.55 crore against a loss of Rs 64.51 crore in FY21. The increase is attributable to an increase in AUM based fees and an increase in revenue from sales of value added services for domestic mutual funds solutions. Also, there was increase in revenues from Issue solutions (IPO service) business.

EBITDA margins have been robust throughout the last three fiscals as can be seen in the table. Net margins have shown improvement in FY22 and in H1FY23.

Return on net worth has been 11.59% (H1FY23), 23.05% (FY22) respectively and Debt to Equity is 0.19x of equity as at the end of FY22.

Table 1 - Financials and Ratios (Amount in Rs Crore)
Financials and Ratios Amount in INR Crores
H1FY23 FY22 FY 21 FY 20
Total revenue 353.76 645.56 486.2 455.27
Revenue from operations 348.77 639.51 481.14 449.87
PAT 85.35 148.55 -64.51 4.52
EBITDA 138.5 293.91 217.45 164.02
Total Assets 1114.81 1026.41 922.61 868.38
Net Cash from operating activities 68.85 252.64 204.63 101.44
EBITDA Margin 39.71% 45.96% 45.19% 36.46%
Net Margin 24.47% 23.23% -13.41% 1.00%

Valuation and Peer Comparison

The IPO is priced at 33.01x with annualized EPS of 10.18 for H1FY23 calculated at the upper price band of Rs 336. P/E is 35.59x when calculated with EPS of 9.44 for FY22. CAMS, its listed peer as per the RHP traded at P/E of 39.10 at the end of FY22. This indicates that the Issue is fully priced at the upper price band. Kfintech's P/BV is 8.74 as at the end of FY22 while CAMS has P/BV of 18.72x as at the end of FY22.

CAMS was listed in Oct 2020 at Rs 1518 against its issue price of Rs 1230 and is currently trading at Rs 2175 on 15th Dec 2022. The scrip has provided return of 17% on an annualized basis over its issue price.

Table 2 - Listed Peer Comparison
Listed Peer Comparison
Particulars CAMS Kfintech
Face Value 10 10
Revenue from operations (FY22 INR Crores) 909.67 639.51
EBITDA margin 44.27% 45.96%
Net Margin 33.50% 23.23%
P/E 39.37 NA
EPS 58.73 9.44
NAV 132.43 38.45
Return on net worth 49.32 23.05
Debt to Equity 0 0.17

Issue Details

Kfintech IPO (Rs 1500 crore) opens on 19th Dec- 21st Dec 2022 with a price band of 347-336 per share. Retail quota is 10% and investors can apply with minimum bid of 40 shares (Rs 14,640). Maximum lot size is 520 shares (Rs 1,90,320).The Issue is fully an OFS by promoter shareholder, General Atlantic Singapore Fund PTE Ltd (Rs 1500 crore) The Promoter Group currently holds 74.37% of shareholding of the Company and will hold 71.74% post issue. The Issue is expected to list on 29th Dec 2022.

Conclusion and Investment Strategy

The company provides SaaS based end-to-end transaction management, channel management, compliance solutions, data analytics and various other digital services to asset managers across segments, as well as outsourcing services for global players.

At end of September 2022, total AUM of mutual funds serviced by CAMS and KFintech stood at 69% and 31% respectively. However, in terms of number of AMCs serviced, KFintech is the largest investor solutions provider to mutual fund industry, providing services to 24 out of the 41 AMCs operating at end of September 2022, thereby accounting to 59% of the market in terms of clientele.

Reviewer recommends Subscribe to the issue.

Review By CA Priyanka Choudhary on 15th Dec 2022

Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.



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