19 Dec , 2022 By : Monika Singh
KFin Technologies IPO opened for public subscription on Monday, 19 December. The issue will close on 21 December. The company that provides services and solutions to asset managers and corporate issuers across asset classes in India aims to raise Rs 1,500 crore via the IPO which is only an offer for sale (OFS). Promoter entity General Atlantic Singapore Fund Pte Ltd will be selling shares worth Rs 1,500 crore. The price band for the offer has been fixed at Rs 347-366 a share. KFin Technologies Ltd shares’ grey market premium (GMP) was at Rs 4 per equity share, down from Rs 7 last week, according to people dealing in unlisted securities.
Issue Size (Amt): Rs 1,500 crore
Issue Size (Shares): 40,983,606
QIB Share: ? 75%
Non-Inst Share: ? 15%
Retail Share: ? 10%
Pre-issue sh (nos): 1,67,568,883
Post-issue sh (nos): 1,67,568,883
Post-issue M Cap: Rs 6,133 crore
“One can subscribe 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 is providing services to 24 out of 41 AMCs in India, representing 59% 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% market share based on the market capitalization of NSE 500 companies.”
“On the upper price band of Rs 366 and EPS of Rs 9.4 for FY22, the P/E ratio works out to be 38.8x. As per the financial comparison in RHP, the only peer comparable to KFIN is better in terms of overall performance. The current valuation of 38.8x is at par with its peer, which means its fully valued. 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 Ltd IPO be rated ‘Neutral’.”
When compared to CAMS, which trades at 39.7x over H1FY23 EPS (annualized), there isn’t much on the table for listing gains and the issue is fully priced. Besides, the erstwhile CP group continue to hold 14.12% of the company’s equity share capital. However, these shares are subjected to encumbrances in favor of lenders of the CP Group, and which could be liquidated in future by ED and hence share prices could come under pressure. Investors are advised to invest in this company when there is valuation comfort post listing. Hence, we have a ‘NEUTRAL’ rating on the issue.”
“General Atlantic Singapore Fund (GASF) is the promoter of KFin Technologies and holds 74.4% of the company. With the upcoming OFS, GASF is selling 40,983,606, which will reduce its shareholding to 49.9%. At the IPO price of Rs 366, KFINT is trading at a TTM P/E of 36.9X, which is significantly lower than its peers – CDSL (TTM P/E of 42.1X) and CAMS (39.9X). Considering the long-term growth opportunity in the Indian capital markets and the strong fundamentals of KFINT, we recommend a SUBSCRIBE rating.”
The company posted losses of Rs 64.5 crore in FY21 due to Covid-led disruption, however, in FY22, profits saw decent growth and it improved to Rs 148.6 crore. “On the valuation front, it is trading at PE of 40x FY22 EPS which we believe is expensive as compared to its near peer. Key Risk: 1) There are outstanding legal matters against the promoter as well as the company. 2) Operate in a highly regulated environment. 3)Significant portion of revenue is contributed by a few customers. 4) Fully Offer for Sale 5) Retail portion is just 10% of the total issue.”
KFin Technologies is likely to finalise share allotment on 26 December, and the public issue is proposed for listing on BSE and NSE on 29 December 2022. Bigshare Services Pvt Ltd has been appointed as official registrar of this IPO. Note that KFin Technologies Ltd is one of the largest registrars, servicing over 90 million investor accounts spread over 1300 issuers including banks, PSUs, and mutual funds.
Ahead of the IPO, KFin Technologies raised Rs 675 crore from 44 anchor investors at the upper price band. The company allotted 18.44 million equity shares to the anchor investors at the upper price band of Rs 366 per equity share, which includes a premium of Rs 356 per equity share with a face value of Rs 10 per share. Of the total allocation of 18.44 million equity shares, 6.96 million shares (37.78% of the total allocation) were allocated to eight domestic mutual funds through a total of 17 schemes. T
The anchor investors included marquee domestic funds such as Goldman Sachs Funds, Nippon Life India Fund, IIFL Private Equity Fund, Canara Robeco MF, Axis MF, and ICICI Prudential Life Insurance, etc, along with foreign funds such as Goldman Sachs (Singapore) PTE, Morgan Stanley Asia (Singapore) PTE, Copthall Mauritius Investment Limited, Pinebridge Global Funds, and Pari Washinton India Master Fund.
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