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KFin Technologies Limited
KFin Technologies Limited
About The Company
Incorporated in 2017, KFin Technologies Limited is a leading technology-driven financial services platform. The company provides services and solutions to asset managers and corporate issuers across asset classes in India and provides several investor solutions including transaction origination and processing for mutual funds and private retirement schemes in Malaysia, the Philippines and Hong Kong.
As on September 30, 2022, the company is India's largest investor solutions provider to Indian mutual funds, based on several AMC clients serviced. The company is also servicing 301 funds of 192 asset managers in India as on September 30, 2022.
As on September 30, 2022, KFin Technologies Limited is the only investor and issuer solutions provider in India that offers services to asset managers such as mutual funds, alternative investment funds ("AIFs"), wealth managers and pension as well as corporate issuers in India.
KFin Technologies Limited is one of the two operating central record-keeping agencies ("CRAs") for the National Pension System (" NPS") in India as on September 30, 2022.
Business Overview
The company 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, on account of the following:
As on September 30, 2022, the company is the only investor and issuer solutions provider in India that offers services to asset managers such as mutual funds, alternative investment funds (“AIFs”), wealth managers and pension as well as corporate issuers in India, besides servicing overseas clients in South East Asia and Hong Kong.
• The company is servicing 301 funds of 192 asset managers in India as on September 30, 2022, representing 30% market share based on number of AIFs being serviced.
• The company is one of the three operating central record keeping agencies (“CRAs”) for the National Pension System (“NPS”) in India as on September 30, 2022.
• As on June 30, 2022, out of the 60 AMCs in Malaysia across wholesale funds, unit trust funds and private retirement schemes as specified in the CRISIL Report, we are servicing 18 AMC clients in Malaysia in addition to three clients in Philippines and Hong Kong as on September 30, 2022. In addition, we have signed two new AMCs in Malaysia and one AMC in Singapore that are yet to launch operations as on September 30, 2022.
• The company is the largest issuer solutions provider in India based on number of clients serviced, as on September 30, 2022. We are one of only two players of scale in India’s issuer solutions space where we hold a 46% market share based on the market capitalization of NSE 500 companies and a 37% market share based on number of clients serviced within NSE 500 companies, each as on September 30, 2022. (Source: CRISIL Report) Player of scale corresponds to entities with minimum 25% market share (in terms of serviced clients) within NSE 500 companies in the Indian issuer solutions space. (Source: CRISIL Report) We also had a 40% and 29% market share based on number of mainboard initial public offerings handled in Fiscal 2022 and six months ended September 30, 2022, respectively.
Business Structure
Product, Service and Operation
The company 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. In addition, we provide several investor solutions including transaction origination and processing for mutual funds and private retirement schemes in Malaysia, Philippines and Hong Kong. For further details in relation to their leadership position. The company operate in three business verticals: investor solutions, issuer solutions and global business services. The company investor solutions includes domestic mutual fund solutions, international investor solutions (global fund solutions), investor solutions for alternatives and wealth managers, and pension services.
Market Share
Investor Solution
Domestic Mutual fund solutions
The domestic mutual fund solutions business was launched in Fiscal 1995 by the businesses acquired by us pursuant to the Scheme of Amalgamation. As of September 30, 2022, we are India’s largest investor solutions provider to Indian mutual funds, based on number of AMC clients serviced. (Source: CRISIL Report) We are providing services to 24 out of 41 AMCs, as on September 30, 2022, representing 59% of market share based on the number of AMC clients. (Source: CRISIL Report) In addition, we signed on two new AMCs that are yet to launch operations as on September 30, 2022. (Source: CRISIL Report) We offer end-to-end transfer agency services to investors and distributors of mutual funds. As of September 30, 2022, we have serviced over USD 153.72 billion of AUM of mutual funds across approximately 65.18 million folios.
Financial Information:
Non Financial Information
Company's Client Base
Company's key clients for their domestic mutual fund services solutions include Nippon Life India Asset Management Limited, UTI Asset Management Company Limited, Axis Asset Management Company Limited, MIRAE Asset Mutual Fund, Sundaram Asset Management Company Limited and LIC Mutual Fund Asset Management Limited and Edelweiss Asset Management Limited.
International investor solutions (Global fund solutions)
The company offer a wide range of services to global asset managers across Malaysia, Philippines and Hong Kong, Oman and Maldives. We also offer full-fledged localized solutions encompassing core services and digital platforms. The company cater to international mutual funds, employee provident funds, private retirement schemes and fund distributors. As on September 30, 2022, the company are serving 21 AMC clients in Malaysia, Philippines and Hong Kong and have signed on three AMCs in Malaysia and Singapore that are yet to go live with them. Additionally, they have one client each in Oman and Maldives as on September 30, 2022.
Description of solution:
We provide the following comprehensive suite of solutions across the ecosystem:
• Investors: KYC onboarding, applications processing, online transacting using the mobile application and portals, viewing of statement of account online and supporting all transaction types such as sales and redemption;
• Distributors: Agent boarding, commission management, agents portal and mobile application, statistical summary of investor position and tax statement;
• Value added service: White labelled digital platforms such as AMC websites, mobile applications, distributor platforms, platforms for AMC employees for assisted sales, platforms for institutional investments, business insight reports to C-suite level officers of AMCs, electronic AGM, compliance platform and e-voting platform.
Company's Global Business Service
The company offer a range of outsourcing services including mortgages, legal services, transfer agency and finance and accounting operations. We primarily support the U.S. operations of Computershare, our primary client for this business.
The company's have a team of 387 employees across operations as on September 30, 2022. We have domain experts engaged across the spectrum of mortgages with collectively over 65 years of experience.
Key performance indicators
The following table sets forth our key performance indicators for the global business services for the relevant periods:
Industry Overview
India’s nominal GDP in Fiscal 2022 is estimated to be USD 3.0 trillion and is projected to grow to approximately USD 4.2 trillion by end of Fiscal 2025. The National Statistics Office (“NSO”), in its provisional GDP estimates released in May 2022, forecasted India’s real GDP to grow by 7.2% in Fiscal 2023. CRISIL MI&A forecasts India’s real GDP for Fiscal 2023 to grow by approximately 7.0%. In addition, the focus of Union Budget 2022-23 on pushing capital expenditure (“capex”) despite walking a Fiscal tightrope provides optimism and creates a platform for higher growth. The lift in the consumption cycle is now tied to broad based pick-up in economic activity and the Indian government is trying to engineer this through focus on investments. CRISIL MI&A estimates that this would enhance the growth potential of India’s economy and bring endurance to growth in the medium term. However, CRISIL MI&A believes that higher oil prices, slower global growth and higher inflation may curb the pace of economy recovery in short term. The impact is expected to be greater in Fiscal 2024 as global growth is expected to decelerate at a faster rate. Additionally, domestic demand may come under pressure as interest rate hikes may get transmitted to consumers, and the increased demand for contact-based services reduces. Consequently, CRISIL MI&A expects India’s GDP growth to slow to 6.0% in Fiscal 2024, with risks to forecast remaining tilted downwards. CRISIL MI&A expects crude oil prices to average at USD 98-103 per barrel in Fiscal 2023 compared to USD 80 per barrel in Fiscal 2022. Further, consumer price index (“CPI”) inflation is expected to average at 6.8% in Fiscal 2023 compared to 5.5% in Fiscal 2022, with risks tilted to the upside. The monsoons being normal and well-distributed (103% of the long-period average), as per the Indian Metrological Department’s forecast, would be critical to the inflation trajectory.
Financial conditions begin to tighten with mounting inflation
The RBI’s Monetary Policy Committee (“MPC”) raised policy rates by 40 bps in May 2022. This was followed by a 50 bps in June 2022, and 50 bps in August 2022 and another hike of 50 bps in September 2022, thus bringing the repo rate to 5.90%, standing deposit facility (“SDF”) to 5.65% and marginal standing facility (“MSF”) to 6.15%. The rate hike can be seen as a response to both domestic elevated inflation and spill over risks arising out of aggressive monetary tightening by major central banks. Compared to 190 bps hike by RBI in Fiscal 2023 to-date, the Fed has hiked its policy rate by 225 bps in 2022 to-date. The MPC expects CPI inflation to remain above its upper tolerance of 6% in the third quarter of Fiscal 2023 (projected at 6.5%) and trend downward thereafter (fourth quarter of Fiscal 2023 at ~5.8% and first quarter of Fiscal 2024 at ~5%).
Despite slower global growth, the MPC believes India’s economic recovery is gaining strength. The latest GDP numbers showed the growth slowing to 4.1% on-year in the fourth quarter of Fiscal 2022 compared to 5.4% in the previous quarter. However, first quarter of Fiscal 2023 showed broadening recovery. High frequency indicators such as bank credit, railway, freight traffic, Goods and Service Tax (“GST”) collections and steel consumption also indicate improvement in economy. Further, the MPC also expects a rebound in contact-based service and investment activity gains to augur well for the economy.
GDP to bounce back over the medium term
After clawing back in Fiscal 2022, CRISIL MI&A forecasts India’s real GDP to grow at 6.5-7.0% per annum between Fiscals 2023 and 2025. This growth is expected to be supported by the following factors:
India to remain a growth outperformer globally
India was one of the fastest growing economies in the world pre-COVID-19, with an annual growth of around 6.7% between calendar years 2014 and 2019. However, while the economic growth in calendar year 2020 had been dented due to COVID-19 pandemic, CRISIL expects the economy to rebound and India to regain its tag of one of the fastest growing economies globally in the medium-term. Going forward, International Monetary Fund (“IMF”) forecasts India’s GDP to grow at a faster pace than other economies. Despite the markdown in near-term growth, India is expected to remain a growth outperformer over the medium run. Stronger domestic demand is expected to drive India’s growth premium over peers in the medium run. Investment prospects are optimistic given the Indian government’s capex push, progress of PLI scheme, healthier corporate balance sheets, and a wellcapitalized banking sector with low non-performing assets (“NPAs”). India is also likely to benefit from China-plus-one policy as global supply chains get reconfigured with shifting focus from efficiency towards resilience and friend shoring. Private consumption (~57% of GDP) is expected to play a supportive role in raising GDP growth over the medium run.
Key Growth Drivers
India has world’s second largest population
As per Indian Census 2011, India’s population was approximately 1.2 billion, and comprised nearly 245 million households. The population had increased by approximately 11% between calendar years 2011 and 2021, reaching approximately 1.4 billion. By the end of calendar year 2031, India’s population is expected to reach 1.5 billion and the number of households are expected to reach approximately 376 million.
Favorable demographics
As of calendar year 2020, India has one of the largest young populations in the world, with a median age of 28 years. CRISIL estimated that approximately 90% of Indians were still below the age of 60 by calendar year 2021 and that 63% of them were between 15 and 59 years. In comparison, in calendar year 2020, the population of United States of America (“U.S.”), China and Brazil below the age of 60 was 77%, 83% and 86%, respectively.
Increasing per capita GDP
In Fiscal 2022, India’s per capita income expanded by 7.6%. As per IMF estimates, India’s per capita income (at constant prices) is expected to grow at 6% CAGR between Fiscals 2022 and 2025 and nominal GDP per capita (at current prices) is projected to increase at a CAGR of 15% between Fiscals 2022 and 2025.
Management of the company
Vishwanathan Mavila Nair - Chairman and Non–executive Director
Venkata Satya Naga Sreekanth Nadella - Managing Director and Chief Executive Officer
Financials
P&L
Balance Sheet
Cash Flow
I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Stocx Research Club). I have no business relationship with any company whose stock is mentioned in this article.
Source - Company's RHP and Website. Disc - This is not an recommendation.
I am not a SEBI Registered individual/entity and the above research article is only for educational purpose and is never intended as trading/investment advice.
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