IPO Analysis: KFin Technologies Limited
The price band of the issue has been fixed at Rs 347 to Rs 366 per equity share.
IPO Rating: Invest for long term
About the issue:
KFin Technologies is the leading technology-driven financial services platform in India, offering complete services and solutions to the corporate issuers and asset managers that make up the capital markets ecosystem. The company is coming out with its initial public offering (IPO) of equity shares of the face value of Rs 10 per equity share. The price band of the issue has been fixed at Rs 347 to Rs 366 per equity share. The issue size is Rs 1,500 crore at higher price band.
The IPO opening date is December 19, 2022, and it will be closing on December 21, 2022. The issue is likely to be listed on the exchange on December 29, 2022. The IPO market lot size is 40 Shares and in multiple thereof. A retail-individual investor can apply up to a maximum of 13 lots (520 shares or Rs 190,320) at upper price band.
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IPO Opening Date
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19-Dec-22
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IPO Closing Date
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21-Dec-22
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Issue Type
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Book Built Issue IPO
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Face Value
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Rs 10 per equity share
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IPO Price
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Rs 347 to Rs 366 per equity share
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Min Order Quantity
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40 Shares
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Listing At
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BSE, NSE
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Issue Size
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40,983,607 shares of FV Rs 2*
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(Aggregating up to Rs 1500 Cr) *
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Offer for sale
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40,983,607 shares of FV Rs 2 *
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(Aggregating up to Rs 1500 cr) *
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QIB Shares Offered
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Not more than 75% of the Offer
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Retail Shares Offered
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Not less than 15% of the Offer
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NII (HNI) Shares Offered
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Not less than 10% of the Offer
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*At Upper Price Band
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Objects of the Issue
The company will not receive any proceeds from the offer and all such proceeds will go to the selling shareholders.
Promoter holding
The pre-issue shareholding is 74.37 per cent, post the IPO the promoter stake will be 49.91 per cent.
About the company
KFin Technologies Limited, founded in 2017, is a leading technology-driven financial services platform. In India, the company provides services and solutions to asset managers and corporate issuers across asset classes, and in Malaysia, the Philippines, and Hong Kong, it provides investor solutions such as transaction origination and processing for mutual funds and private retirement schemes.
Based on the number of AMC clients served as of September 30, 2022, the company is India's largest investor solutions provider to Indian mutual funds. It provides services to 24 out of 41 AMCs in India, representing 59 per cent of the market share based on the number of AMC clients. The company also services 301 funds of 192 asset managers in India.
KFin Technologies Limited is the only investor and issuer solutions provider in India as of September 30, 2022, offering services to asset managers such as mutual funds, alternative investment funds ("AIFs"), wealth managers, pension funds, and corporate issuers.
As of September 30, 2022, KFin Technologies Limited is one of two operational central record-keeping agencies ("CRAs") for India's National Pension System ("NPS"). It is India's largest issuer solutions provider in terms of clients served.
The company has classified its products and services as follows:
1. Investor solutions (Account Creation, Transaction Origination, Redemption, Brokerage Calculations, Compliance / Regulatory Reporting Recordkeeping). Domestic mutual funds, international mutual funds, pension services, alternative investments, and wealth management are all available.
2. Issuer solutions (Folio creation and maintenance, Transaction Processing for IPO, FPO, and other corporate actions, Compliance / Regulatory Reporting Recordkeeping MIS, Virtual Voting e-AGM, e-Vault).
3. International trade Domestic mutual services (Mortgage Services Legal Services Transfer Agency Finance and Accounting).
The company processed 1.6 million average daily transactions, including 1 million systematic transactions like systematic investment plans (“SIPs”) per day and USD 3.2 billion, average daily settlement for domestic mutual funds in six months ended. During FY22 and 1HFY23 it maintained an accuracy rate of above 99.5 per cent of all transactions processed while adhering to the timelines as stipulated in agreements with clients.
Financials
During FY20-22, its revenue and PAT clocked CAGR of 19 per cent and 437 per cent, respectively, while the EBITDA margin improved from 35.3 per cent in FY20 to 45 per cent in FY22. The company reported revenue of Rs 645.56 crore in FY22, up 33 per cent YoY, while EBITDA increased to Rs 290 crore in FY22 from Rs 210 crore in FY21. PAT for FY22 stood at Rs 148.55 crore bn from a net loss of Rs 64.5 crore in FY21. The company’s average debt-to-equity ratio during FY20-22 stood at ~0.6x.
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Period Ended (Rs Crore)
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FY19
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FY20
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FY21
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FY22
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Total Assets
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1021.78
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868.38
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922.61
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1026.41
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Total Revenue
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164.76
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455.26
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486.2
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645.56
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Profit After Tax
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8.96
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4.52
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-64.51
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148.55
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Net Worth
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519.28
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409.58
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346.4
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644.34
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Total Borrowing
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406.01
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375.44
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346.13
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122.51
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Valuation and Outlook
The company has asset-light business model with high operating leverage, profitability and cash generation. The company’s share at the upper end of the IPO price band is available, at 41.3x its FY22 earnings and 35.92x if we annualise first half of FY23 earnings. The offer price seems to fully price the positives of the company and compared to other listed price there is very little left on table for IPO subscribers. Hence, only a long-term investor can invest having long term investing horizon.