The Rs 1,500 crore IPO by KFin Technologies is all set to hit the market today. The offer-for-sale (OFS) by existing promoter General Atlantic Singapore Fund will be sold in the Rs 347-Rs 366 price band. Ahead of its IPO Financial services platform KFin Technologies raised Rs 675 crore from anchor investors. Analysts said the issue can be subscribed by investors with fairly long-term investment horizon.
Anand Rathi has a ‘subscribe’ rating on the issue; KR Choksey Securities has a ‘Neutral’ rating while Prabhudas Lilladher and SMC Global said long-term investors may subscribe to the issue.
Last heard, the IPO was commanding a thin grey market premium of Rs 8 per share, the same as the last few days.
KFin Technologies is India’s largest investor solutions provider to Indian mutual funds, based on number of AMC clients serviced as on September 30. It is providing services to 24 out of 41 AMCs in India, as on September 30, representing 59 per cent of market share based on the number of AMC clients. In addition, it signed on two new AMCs that were yet to launch operations as on September 30.
KFin Technologies has an asset-light business model with recurring revenue model, high operating leverage, profitability and cash generation, said Anand Rathi, which said the issue is valued at 41.3 times its FY22 earnings at the upper end of the IPO price band.
“The valuation of the IPO appears to be reasonable when we compare with listed peers. The company has significant scope for growth, considering its diverse product profile and addition of new client base and bright prospects ahead, we recommend a ‘subscribe’ rating to this IPO,” it said.
Not all agree.
As per the financial comparison in RHP, the only peer comparable to KFin Technologies is better in terms of overall performance, said KRChoksey. The current valuation of 38.8 times is at par with its peer, which means its fully valued, the brokerage said.
“The company has significant scope for growth, considering its diverse product profile and extensive client base. In addition, the company will maintain its operating margins at a sustainable level, resulting in healthy earnings and returns ratios. As a result, we recommend that KFIN Technologies IPO be rated Neutral,” KRChoksey said.
SMC has assigned two out of five stars to the issue.
“The company is a leading technology-driven financial services platform. It has diversified streams of income sources. It posted a roller-coaster ride in the bottom lines for the last three fiscals. The company has an Asset-light business model with a recurring revenue model, high operating leverage, profitability, and cash generation. However, significant disruptions in its information technology systems or breaches of data security could adversely affect its business and reputation. A long term investor may opt the issue,” it said.
Prabhudas Lilladher said one can subscribe the issue for long term as it is India’s largest investor solutions provider to Indian mutual funds, based on the number of AMC clients serviced. The company, it said, is providing services to 24 out of 41 AMCs in India, representing 59 per cent of the market share based on the number of AMC clients.
“It is one of only two players of scale in India’s issuer solutions space where the company holds a 46 per cent market share based on the market capitalisation of NSE 500 companies. It also had a 40 per cent and 29 per cent market share based on the number of mainboard IPOs handled in FY’22 and H1FY’23, respectively. Through its acquisition of Hexagram, KFin serves six AMCs in India on fund accounting. Kfin is servicing 301 funds of 192 asset managers in India representing 30 per cent market share based on the number of AIFs being serviced,” it said.
KFin Technologies is the only investor and issuer solutions provider in India that offers services to asset managers such as mutual funds, AIFs, wealth managers and pension as well as corporate issuers in India, besides servicing overseas clients in South East Asia and Hong Kong as on September 30.
Overall, it is servicing 301 funds of 192 asset managers in India as on September 30, representing 30 per cent market share based on number of AIFs being serviced. KFin Technologies is one of the three operating CRAs for the NPS in India as on September 30, 2022.
KFin Technologies is also the largest issuer solutions provider in India based on number of clients serviced, as on September 30, 2022.