Rs 1,500-cr Kfin Technologies IPO opens for subscription: Should you bet?

The Rs 1,500-crore initial public offering (IPO) of Kfin Technologies opened for subscription on Monday, December 19, and will close on Wednesday, December 21. With complete offer for sale (OFS), shares of this financial services platform are priced in the range of Rs 347-366 apiece.

While 75 per cent of the issue is reserved for qualified institutional buyers (QIBs), 15 per cent, and 10 per cent is reserved for non-institutional buyers (NIBs), and retail investors, respectively. The net proceeds of the issue will be utilized to carry out OFS by the promoter selling shareholder and general corporate purposes.

Kfin Technologies provides services and solutions to asset managers and corporate issuers across asset classes in India. The company also provides several investor solutions including transaction origination and processing for mutual funds and private retirement schemes in Malaysia, the Philippines, and Hong Kong.

Financially, the company saw total income of Rs 353 crore in the first half of this fiscal year (H1FY23) and Rs 85 crore profit-after-tax (PAT). Total expenditure, meanwhile, amounted to Rs 215 crore in H1FY23.

According to IPO Watch, shares of Kfin Technologies traded at zero premium in the grey markets. Shares will be listed on both NSE and BSE on December 29. The company will join listed players in the market like CAMS and CDSL.

Meanwhile, here’s a compilation of brokerage recommendation on the IPO:

Anand Rathi | SUBSCRIBE

The brokerage firm believes that the valuation of Kfin Technologies seems reasonable if compared with the listed peers. Analysts foresee significant scope for growth, considering diverse product profile and addition of new client base. The company is available at the upper end of the IPO price band, at 41.3x of its FY22 earnings, with a market cap of Rs 644 crore. Therefore, they recommend ‘Subscribe’ rating to the IPO.

Chola Wealth | SUBSCRIBE

The brokerage firm believes that the company’s asset-light service-based model is attractive from a profit generation point of view. Moreover, since they have strong multi-year relationships with clients across platforms, analysts believe that this puts the firm in a favorable position to increase business share from existing clients. Hence, they recommend investors to ‘Subscribe’ with a long-term horizon.

KRChoksey | NEUTRAL

Since the company holds 32 per cent market share based on the number of alternative investment funds (AIFs) serviced as on September 30, 2022, it makes it one of the market leaders in this segment. The company also has a diverse clientele across various segments. However, the brokerage firm believes that significant disruptions in its information technology systems or breaches of data security could adversely affect its business and reputation. Therefore, they remain ‘Neutral’ on the public issue.

Ventura Securities | SUBSCRIBE

General Atlantic Singapore Fund (GASF) is the promoter of Kfin Technologies and holds 74.4 per cent of the company. With the OFS, GASF will offload over 4 lakh shares and reduce its shareholding to 49.9 per cent. At the IPO price of Rs 366, the company trades lower than its peers like CDSL and CAMS. Therefore, considering the long-term growth opportunity in Indian markets and strong fundamentals of Kfin Technologies, the brokerage firm recommends a ‘Subscribe’ rating.

Ashika Research | NEUTRAL

The brokerage firm believes that the shares of Kfin Technologies are subject to encumbrances in favor of lenders of the CP Group, which hold 14.12 per cent of the company. The shares could be liquidated later by the ED and come under pressure. Therefore, analysts recommend a ‘Neutral’ rating on the issue.

HDFC Securities | NOT RATED

As on September 30, 2022, the company had 24 operating clients in its domestic mutual fund solutions business. Later, it signed two new AMCs, which are yet to launch operations. The brokerage firm believes that though it aims to increase its revenue from these clients in-line with overall market growth, it also seeks to increase revenue from these clients by increasing its share of its ‘platform-as-a-service’ offering.