KFINTECHNSEJanuary 31, 2025

Kfin Technologies Limited

10,046words

55turns

8analyst exchanges

4executives

Download PDF ↗KFINTECH stock page →

Management on call

Sreekanth Nadella

MD AND CEO

Vivek Mathur

CFO

Amit Murarka

HEAD IR

Devesh Agarwal

IIFL CAPITAL SERVICES LIMITED

Key numbers — 40 extracted

33%

ially, the numbers are out there in the market. So you would have seen it. Our revenue grew about 33% year-on-year and same is the case with EBITDA and PAT numbers roughly about 35%. We are satisfied

35%

enue grew about 33% year-on-year and same is the case with EBITDA and PAT numbers roughly about 35%. We are satisfied with the results in the context of the mark-to-market gains being substantively

42.8%

of market share has grown as against a market expansion of 39.4 odd percent. We have grown about 42.8%. That's a good 300 basis points expansion in the overall AUM on a year-on-year basis. Same is the

300 basis point

grown as against a market expansion of 39.4 odd percent. We have grown about 42.8%. That's a good 300 basis points expansion in the overall AUM on a year-on-year basis. Same is the case on a sequential basis wit

8 million

y about 1,000-odd new client contracts we have added. The total folio count has expanded by about 8 million. You would have seen KFintech rendering IPO services to several large ones. In fact, probably eve

24%

corporate actions and corporate events meant that revenue continues to chug along at a healthy 24% plus on a year-on-year basis and driving about 20% CAGR over the past 3 to 4 years. Moving along,

20%

t revenue continues to chug along at a healthy 24% plus on a year-on-year basis and driving about 20% CAGR over the past 3 to 4 years. Moving along, international business, something that we're all e

50%

in Malaysia again. Our share -- market share in Malaysia at this moment in time surpasses over 50% in terms of total AMCs there. And as I've said in the previous quarter, the deals that we are --

37%

d one was the asset classes. Today, we manage about 535 funds, getting our market share closer to 37% in terms of the number of funds. The AUM growth has been substantive at about close to 55% year-o

55%

ser to 37% in terms of the number of funds. The AUM growth has been substantive at about close to 55% year-on-year, bringing our total assets under management to over INR1.4 trillion. We have been wi

INR1.4

ubstantive at about close to 55% year-on-year, bringing our total assets under management to over INR1.4 trillion. We have been winning more than 60% plus in domestic market and about three fourth of the

60%

ringing our total assets under management to over INR1.4 trillion. We have been winning more than 60% plus in domestic market and about three fourth of the funds in the GIFT City. And we continue to

Advertisement

Guidance — 17 items

Devesh Agarwal

opening

“Sreekanth for his opening remarks, which will be followed by a Q&A session.”

Sreekanth Nadella

opening

“I couldn't be more thrilled to be able to announce our Q3 results, which continue to express the outcomes that we intend to deliver, which is a broad-based expansion of our businesses, profitable businesses and ones which are sustainable.”

Sreekanth Nadella

opening

“So that expansion as well as the solutions we have created in corporate actions and corporate events meant that revenue continues to chug along at a healthy 24% plus on a year-on-year basis and driving about 20% CAGR over the past 3 to 4 years.”

Sreekanth Nadella

opening

“And I continue to maintain that SIP market share will be a good indicator in terms of where the overall AUM could be given this is the sticky retail book.”

Sreekanth Nadella

opening

“There will be more announcements to come into the coming quarter.”

Abhijeet Sakhare

“If it's possible to get a sense of the overall contract value just so that we are better able to forecast growth going forward?”

Sreekanth Nadella

“And that's what definitely we will be doing, right?”

Madhukar Ladha

“Would you want to revise that guidance with this new addition?”

Sreekanth Nadella

“What I can definitely do is the first one, which is to say, yes, I'd like to believe that it will be a much higher opportunity at scale.”

Shrija Pathak

“So I'm trying to get this to maybe next year when if the market or FY '25 when the market doesn't perform well and maybe we won't see the AUM growth coming from the market, but maybe from the SIP inflows that are coming in.”

Risks & concerns — 13 flagged

Our strategy for the last 5 years had been one that of diversifying risk whilst using that opportunity to expand our addressable market, which is, in some sense, on 3 axes.

— Sreekanth Nadella

And like every organization would have its mechanisms of risk diversification in terms of where they would want to engage with a partner versus somewhere else.

— Sreekanth Nadella

This was a decision made largely in the context of where the opportunity size and the capabilities exist, and they wanted to diversify the risk in terms of working with the partners.

— Sreekanth Nadella

Very, very important question in the context of what is probably looking like a cyclical slowdown of India's economy.

— Sreekanth Nadella

So in Q3, despite a mark-to-market slowdown, the MF industry and ergo, us, who are basically the administrators in that area, still continue to grow, albeit at a smaller pace.

— Sreekanth Nadella

And we continue to see a reasonably commensurate decline in AUM in this quarter, which effectively points to this very simple fact that the net flows -- net inflows haven't been strong enough to offset the mark-to-market correction that has happened.

— Sreekanth Nadella

But by and large, the investor behavior has been -- has about a paradigm shift in India with markets when they're down, there has been more mobilization of money coming into the industry and hence, offsetting the impact of mark-to-market.

— Sreekanth Nadella

But we are, at the moment, a little cautious in terms of how to project the overall AUM growth into the next year.

— Sreekanth Nadella

And this is the genesis of our entire journey over the last 5 years, which is risk diversification, if not move away, but at least reduce the reliance on one asset class mutual funds and one geography India and hence, the dependency in the mark-to-market, right?

— Sreekanth Nadella

Clearly, if there is a significant drop with no offset happening in the form of net flows, we will have probably adverse impact anywhere between 4% to 5% decline in revenue sequentially, so to speak.

— Sreekanth Nadella

We obviously work with -- in most cases, it is a full service model, which means that it's our platform, our service and we underwrite all the risk associated with that, much like in the case of mutual funds.

— Sreekanth Nadella

And hence, to be a true partner to underwrite the risk and not just give the platform, we charge basis points.

— Sreekanth Nadella

So -- in wealth, too, there are various places where we -- it is fully our people, our processes, our risk management, our platform and hence, there is basis points.

— Sreekanth Nadella

Advertisement

Q&A — 8 exchanges

It's good to see the progress and the broad-based growth across verticals. So congrats on that. See, I have a question on the new businesses or the new deal wins. If it's possible to get a sense of the overall contract value just so that we are better able to forecast growth going forward?

Sreekanth Nadella

So I would probably prefer to have a separate conversation with Amit on that, given these are a number of deals. But broadly, to give you a picture, given some of these are license deals, for example, our fund accounting platform, you'll have a little lumpy revenue on year 1 and then about 25% to 30-odd percent of AMC contract value pretty much in perpetuity after that. Some are deals that are won today, but revenue will kick in after, say, 2 months or 3 months depending upon when it gets transitioned, so on and so forth. But -- and same is the case with international, too, right? So it would

I have three questions. The first one on the BlackRock opportunity, and you laid out how there are 108 funds and all would like to tap into that. But just wanted to understand, given BlackRock, 75% of their assets are in the US and Europe that they manage through Aladdin. Would this require you to acquire an asset there to access this opportunity? Or could you do that with your current capabilities? And if you -- if that requires an acquisition, then could you remind us again what kind and what size of acquisition are you looking at? That would be the first question. Two, when I look at the ot

Sreekanth Nadella

Thanks, Supratim. Great question. So I'll start with the first one in terms of the operating model and the necessity to have a local structure for us to be able to service a client. The answer is it is not necessary. It's not mandatory. Just I'll bring your attention to the funds we're currently managing, which are domiciled in Canada. We do not have any presence in Canada or anywhere in Europe at this moment in time, and we're able to render the solutions 100% from offshore. So whilst it is not a regulatory need, but it could be a client expectation, and that's understandable. But again, if y

Congratulations on a good set of numbers. Just on this international business opportunity, I remember a couple of quarters back, you had said that this could be a $25 million or so in 2 years' time. Now we've also added additional BlackRock Aladdin capabilities. Would you want to revise that guidance with this new addition? What sort of incremental revenues could we see? That would be my main question. Yes.

Sreekanth Nadella

Thanks again, a great question. I would love to answer in affirmation and probably give a number. What I can definitely do is the first one, which is to say, yes, I'd like to believe that it will be a much higher opportunity at scale. And that is the reason why we worked on this opportunity for such a long period of time. It's not very easy to be in that marquee list, and there was 18 months of due diligence that happened, significant engagement in that regard. That said, I would be in a better position to answer this question mathematically, probably into the coming quarter. As I've just ment

The pretext of my question has really got to do with the market performance. Over the past couple of months, you know that it's been muted. So just looking at your year-on-year AUM growth, is there a possibility where you can maybe give the contribution from the market performance versus the SIP inflow or the other inflow that has come into all these fund houses? So I'm trying to get this to maybe next year when if the market or FY '25 when the market doesn't perform well and maybe we won't see the AUM growth coming from the market, but maybe from the SIP inflows that are coming in. So yes, ju

Sreekanth Nadella

Sure. Thanks for that. Very, very important question in the context of what is probably looking like a cyclical slowdown of India's economy. I'll just draw attention to Q3 in terms of how it panned out and a little bit of insights into what's happened over the last 3 weeks in this very month itself and how possibly we can extrapolate that into the coming quarters, if I may, right? I mean Q3, as Vivek had already called out, there was a mark-to-market correction by over 4%, 4.5% over Q2. And however, that got compensated by higher net flows. The net flows in Q3 were 20% higher as compared to Q2

So Sreekanth, one question on your wealth management proposition. Could you -- because I think a lot of these clients, at least who are larger wealth managers in India also work with you on the AIF piece or the domestic RTA piece. So exactly how will this particular proposition differ from the TA and FA services that you're already providing? That is one. Second is I think on your sequentially, if I look at the international and Other Investor Solutions business, the revenue growth has been relatively weaker as compared to the AUM growth. So was that largely because there were some lumpy trans

Sreekanth Nadella

So the first one, in terms of the mPower Wealth, the wealth platform we've launched. See, the asset management solution, largely transfer agency, which is managing your investor side, the liabilities of your book, right, investor onboarding and then the creation of units and destruction of the units as the redemption happens, so on and so forth. That is a full-fledged operations activity. It is our platform, it is our service, so on and so forth. In the case of wealth, it is different because when you come to a wealth manager, you would be selling both your own captive funds, but also third-pa

I just wanted some more color on the custodian partnership that you mentioned with Sun Life. Could you please share more details on that? And do you think you have opportunities to make such other partnership in other geographies as well? That's the only question I had.

Sreekanth Nadella

Sure. I'll just clarify one point. With Sun Life, it's not a custodial partnership. It's a contract we have won from Sun Life custody, right? So Sun Life is an AMC in Philippines, and they also are a custody. We have won the contracts to render one directly to Sun Life as an AMC. Second, the other AMCs that today, Sun Life custody provides the custodial services, and that is about 4 or 5 more asset management companies that scope is getting discovered. And so to that extent, it is working with them and their clients. And it is a similar situation with the other LOI we received in Malaysia, whi

Just a few questions. First, going back to the BlackRock Aladdin partnership. While you mentioned the opportunity size in terms of the number of clients and AUMs managed on the Aladdin platform. Just wanted to understand in terms of the eight partners who are already existing, would you have done some due diligence on the revenue clock by this partnership still now, be it BNP, StanC and the eight put together, what would be the revenue pool sitting out there? Second, if you can quantify the Hexagram revenues for the quarter or maybe 9 months? And lastly, on the Issuer Solutions business, you m

Sreekanth Nadella

The first one, in terms of the alignment we have, we don't know at an individual administrator level as each of those administrators not just leverage Aladdin to provide solutions, but they also have their own potential captive in-house platforms. They could also be working with many other platforms, industry platforms such as Charles River and Advent -- sorry, Geneva by Advent and there are a few more platforms out there in the world, right? So their revenue obviously will be a combination of several other items. And hence, we can't simply add up their revenues and see how much of that is com

On behalf of IIFL Capital, I thank the KFin management for giving us an opportunity to host the call today. Before we conclude, Vivek, would you like to add any closing remarks?

Vivek Mathur

Thanks, Devesh. I think there is nothing more. We have already covered the details. We continue to remain buoyant about the various businesses in terms of the growth potential, and we do expect that the market will remain supportive, especially the net inflows as we see and the new SIP hits that are coming through. The behavior of the retail investors and the tokenization of the mutual fund ticket size that the regulator is attempting to garner more AUM will certainly help in terms of the AUM industry. Our efforts in terms of international expansion with the approval of Thailand and GIFT City

Speaking time

Sreekanth Nadella

Moderator

Vivek Mathur

Pranuj Shah

Dipanjan Ghosh

Devesh Agarwal

Abhijeet Sakhare

Madhukar Ladha

Shrija Pathak

Uday Pai

Advertisement

Opening remarks

Devesh Agarwal

Thank you, Steve. Good morning, everyone, and welcome to the Q3 FY '25 Earnings Call of KFin Technologies Limited. Today from the company, we have with us Mr. Sreekanth Nadella, MD and CEO; Mr. Vivek Mathur, CFO; and Mr. Amit Murarka, Head of Global Business Finance, M&A and Investor Relations. I would now like to hand over the call to Mr. Sreekanth for his opening remarks, which will be followed by a Q&A session. Thank you, and over to you, Sreekanth.

Sreekanth Nadella

Thank you very much. Very good morning, very welcome to one and all. This is the first call of the New Year. So wishing all the participants a very happy new year as well. I couldn't be more thrilled to be able to announce our Q3 results, which continue to express the outcomes that we intend to deliver, which is a broad-based expansion of our businesses, profitable businesses and ones which are sustainable. Our strategy for the last 5 years had been one that of diversifying risk whilst using that opportunity to expand our addressable market, which is, in some sense, on 3 axes. X-axis is increase in various different business services, not just RTA, but our fund accountant, our data and the technology leadership roles, CRM, mobility solutions, cloud solutions, what have you. Second is to expand into every asset class in the asset management industry, mutual funds, alternatives, PMS, pensions, private retirement schemes, bond markets, what have you. Third, a geographical expansion and no

Vivek Mathur

Thank you, Sreekanth. On the overall financial performance, the revenue has gone up sequentially as well across all segments, except the mortgage segment, which is noncore for us. Overall, revenue growth year-on-year is about 33% and same is for 9 months ended December, even sequentially 3.4% growth. Across business lines, we have seen growth and with new client wins and addition of AUM. So one interesting phenomenon in mutual fund that we witnessed this time in this quarter is that although the mark-to-market was negative, while the net inflows remained positive and it compensated for the mark-to-market loss, resulting in a growth of AUM, which has benefited us in terms of the fee as well. So the industry is doing well in terms of attracting fresh investment as well as SIP -- strong SIP inflows, which is giving us better results. In terms of the various mix of the revenue, mutual fund revenue, fee-based revenues is 71%. The Issuer Solutions business is 14%. The International and Other

Advertisement

← All transcripts KFINTECH stock page →

Kfin Technologies Limited

Market Movers