KFINTECHNSEApril 21, 2025

Kfin Technologies Limited

11,337words
54turns
10analyst exchanges
3executives
Management on call
Sreekanth Nadella
MD AND CEO
Vivek Mathur
CFO
Amit Murarka
HEAD IR
Key numbers — 40 extracted
rs,
leading fund administrator over a period of time, delivering significant value to the fund managers, to the entire intermediary ecosystem, delivering through frugal engineering and highly innovative
13.5 million
u were to take the 6 months ending '25, the total revenue that has been clocked is roughly about $13.5 million. And with a current run rate of roughly about $1.5 million, it is continuing to grow over 35% yea
1.5 million
at has been clocked is roughly about $13.5 million. And with a current run rate of roughly about $1.5 million, it is continuing to grow over 35% year-on- year. And a fund size, total funds that are being sup
35%
million. And with a current run rate of roughly about $1.5 million, it is continuing to grow over 35% year-on- year. And a fund size, total funds that are being supported by the organization are a li
51%
ons, what have you. The overall transaction allows KFintech an immediate control stake of about 51% and with a very definitive path to gain 100% ownership over the next 5 years. From our overall in
100%
n allows KFintech an immediate control stake of about 51% and with a very definitive path to gain 100% ownership over the next 5 years. From our overall investment corpus spend standpoint, we are comm
30 million
. From our overall investment corpus spend standpoint, we are committed to infuse about close to $30 million as a secondary and $5 million as primary, making the organization valued at $63 million pre-money
5 million
orpus spend standpoint, we are committed to infuse about close to $30 million as a secondary and $5 million as primary, making the organization valued at $63 million pre-money and about $68 million post mo
63 million
close to $30 million as a secondary and $5 million as primary, making the organization valued at $63 million pre-money and about $68 million post money. And as I said, this $34.7 million gives KFintech a
68 million
y and $5 million as primary, making the organization valued at $63 million pre-money and about $68 million post money. And as I said, this $34.7 million gives KFintech a 51% control as and when the infusi
34.7 million
nization valued at $63 million pre-money and about $68 million post money. And as I said, this $34.7 million gives KFintech a 51% control as and when the infusion of cash happens. The transaction itself wil
49%
hile from now in terms of the current -- the shareholding structure of this entity. The remaining 49%, KFintech is poised to acquire from the year FY '28, '29 and '30 in the tranches of 16.3% each, t
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Guidance — 20 items
Sreekanth Nadella
opening
“From a fund domiciliation also, it's a very nicely spread out in terms of our own corporate objectives in terms of how we intend to scale up our global fund administration business.”
Sreekanth Nadella
opening
“And with a whole lot of synergies and the scale benefits that will start to accrue from here on, we expect a quicker turnaround in terms of the margins as well.”
Sreekanth Nadella
opening
“And hence, it's a hugely complementary item, one that obviously we intend to leverage for our expansion from a KFintech standpoint as well.”
Sreekanth Nadella
opening
“We intend to make it at least 10, if not 20.”
Sreekanth Nadella
opening
“And that is a need in the market, which we will be able to bridge in times to come.”
Sreekanth Nadella
opening
“We were competitors, but obviously, we will have synergies from here on, and I'll talk about the kind of synergies we intend to get from here on.”
Sreekanth Nadella
opening
“That marks near over 60% CAGR in terms of the number of funds and purely in terms of revenue, a 34% CAGR growth, which is pretty impressive.”
Sreekanth Nadella
opening
“And the new client acquisition, as you have seen, growing over 60% CAGR adds immediate revenue as and when the new funds get added into this equation.”
Sreekanth Nadella
opening
“The transaction structure too helps KFintech in terms of the cash management effectively at 51% stake and about $34 million, INR300 crores of cash outflow, we will be funding it entirely from our internal accruals.”
Sreekanth Nadella
opening
“One of the big synergy items that we will be exploring in the coming weeks and months would be about leveraging KFintech's own platforms as against third-party platforms, which would further optimize at a cost level and also would make KFin's platform a globally relevant platform, right, in real quick time, even as we are still largely India and Asia-centric.”
Risks & concerns — 3 flagged
And we did not see any concentration risk in that angle.
— Sreekanth Nadella
Some of it is purely because they want to diversify the risk.
— Sreekanth Nadella
But that said definitely not of immediate priority or concern.
— Sreekanth Nadella
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Q&A — 10 exchanges
Q
Firstly, I wanted to understand that now that you have Ascent as a platform, you have Hexagram as a platform as well. So how could you manage the two different leadership teams? Or how would the responsibilities be divided so that you can retain both the leadership team? So if you could give us some color on that, what are the plans of retaining both the leadership teams? So how do you integrate both these platforms that -- if you could give some color on that, that also will be very helpful. Because I wanted to understand that in Southeast Asia, which platform do you sell now? Is it Hexagram
Sreekanth Nadella
Thanks, Supratim. Great questions. So the first one, I want to clarify, Ascent Fund Services is not a platform company. Hexagram is a platform company. There is no competition. There is no competing platforms. Ascent today leverages, I've already called out, third- party platforms to render services. Think of a scenario where a company -- a mutual fund company today takes KFintech's platform and renders services by putting their own employees, right? So that's the model Ascent has. So there is absolutely no competition. This is complementing. Ascent today uses third-party platform puts its own
Q
Sreekanth, just on the previous point that you made, Ascent then gives you like a geographical presence across all of these markets. And in that sense, just wanted to understand when you look at the realizations, right, about 7, 8 basis points, the headline simple math, I wanted to sort of get a breakdown of what would be, let's say, a simple cost of revenues or the underlying cost of the product itself, right? And then the rest of the cost overheads in terms of employees, offices and rest of it.
Sreekanth Nadella
Abhijeet, yes, so the gross margins called out is roughly about 52% at this point in time, right, cutting across all the three business lines. And that gross margin will expand, obviously, as the AUMs of the fund houses and the funds that Ascent is already servicing. So if it is a continual growth only based on new fund addition, obviously, there is going to be a commensurate nonlinear cost addition, if I may, right, for each of those funds. But the growth coming from any of the existing funds always give you much significantly higher operating leverage, if I may. And so to that extent, I woul
Q
Just a few questions from my side. One, if you can give some color on the revenue concentration, let's say, the top 10 or top 50 funds within Ascent's mix. Second, this was one of the questions asked by one of the previous participants in terms of the employee retention strategies. So as I understand that over a course of, let's say, let's say, the next 5 to 6 years, the founders would have broadly monetized their stake and maybe the ESOPs, if any, of the top management also would have kind of got utilized. So what makes you believe that you can really retain them? Will there be any employee r
Sreekanth Nadella
All right, Dipanjan, Sure, thanks a lot for that. Three questions. The first one in terms of the revenue concentration, you've seen the total funds being serviced is 576 funds across $24 billion, giving roughly about $17 million to $18 million as revenue. This isn't like MF concentration where top 2, top 5 can have a very heavy weightage in terms of the total revenue. This is a highly secular spread of revenue across almost all of these fund houses. So the biggest client would not be contributing more than 1.5% to 2% of the revenue, right? So we do not see -- we did not -- in fact, that was on
Q
Most of the questions have been asked. Just 1 question. The 52% kind of gross margin that you mentioned, -- is it largely the cost side of it? Is it largely the platform cost or any other costs are included in the gross margin calculations?
Sreekanth Nadella
It's platform and people, the operations people. Platform. Okay. Okay, that's it from my side. This is Vivek. I just want to add on to what Sreekanth mentioned. The platform cost is miniscule. It's just about 5% of the expenses. The bulk of the cost comes from employee cost and other expenses related to infrastructure. Okay. So the platform cost is just 5% of the 48% expenses, right? Yes.
Q
Just a couple of questions. Firstly, sir, is it fair to assume that the realizations are about in the 12 to 14 bps kind of realization? That's question number one. Second is, does this acquisition impact your get added, it's kind of margin and earnings dilutive to you in the sense that from a percentage basis. Now obviously, as it turns profitable, will add to your overall profitability. But from a margin percentage perspective. And third would be, given that these are primarily in the alternate business, are these -- the 500- plus scheme funds, are these funds or are these schemes and these s
Sreekanth Nadella
Sure. Thank you. So the first answer, reasonably binary. It's not 12, 14, it's not 7. The number is closer to 10 basis points on the realized yield. In terms of margin dilution, clearly, as you've seen, it already has turned EBITDA positive. And into the coming months and quarters, hopefully, it will -- the margin expansion will happen. Clearly, it is not at the same margin level as KFintech. So to that extent, obviously, for a shorter period of time as the organization gets that far. And then we start realizing our own synergies, so there will be a further cost takeout. As we start consolidat
Q
The first question is that this money that is being used for acquisition is going through the promoters of the company or is it going into the target company?
Sreekanth Nadella
Nearly $30 million is secondary and $5 million is primary infusion. Okay. And after this $5 million, there is -- do you think there will be more requirement of funds for this company? Per our assessment, they will not be needing much. As I said, they've already turned EBITDA positive. They should soon start cash positive as well. And this $5 million primary infusion will clear out a small debt component they have it on that book. And once that goes away, I do not believe there will be any necessity for further cash infusion on an immediate basis. Sure. And is it right to assume that the client
Q
Okay. Thank you.
Management
Q
This is Madhukar Ladha from Nuvama. Thank you for the detailed presentation. Most of my questions have been answered. Just a couple left. First, on the growth trajectory. So the company has done really well in the last sort of 5 years that it's been into existence and you've got a pretty sizable AUM right now. What sort of growth should we expect over the next 4 years, 5 years and on the margin side, right now we are breaking even. We already have a sizable India presence. So the whole offshoring and the India angle is already sort of playing out of here. So what should be the big margin drive
Sreekanth Nadella
Understood. Thank you. So the historic growth had been about 35%, 36% CAGR. Management's base case is in the similar trajectory into the coming years. And that does not take into account a synergistic model, which is effectively how KFin complementing the strength that Ascent brings and how Ascent taking advantage of the strength that KFin brings will grow together. We believe the number will be higher than that. I do not want to conjecture, but we are confident to at least maintain the current growth trajectory and with a strong potential upside as the synergies fructify in time to come. In t
Q
Hi, good evening. My question is around if you can lay out here the deliberations that you would have had around the build versus buy arguments, especially in this case because this seems like an organization which is more sales heavy. And also there is a fair bit of complementarity in terms of the geographies that KFin operates as well as where Ascent operates. So it will be helpful if you can give those arguments?
Sreekanth Nadella
Sure. Thank you. So this is a long time in the making, isn't it? I mean, almost a little over a year. And we've always believed a very healthy debate and we have a very strong business development committee, board led. And at any point in time we always evaluate anywhere between three to five potential opportunities and we have dedicated capacity to do that. And this particular asset, obviously, was into -- straight into one of the three angles we always looked at in every asset. One of that was either it adds a new business line or a new product. It opens a new geography and or in rare occasi
Q
Thank you. I think we are all very excited with this acquisition. And while it starts with 51% majority and Board control, it will be a 100% owned subsidiary in 5 years’ time and everything based on our plan and expectation should be funded internally. It puts KFintech as the first Indian company to be a global fund administrator. And we will see that the growth and trajectory and the updates about this asset, we continue to share with you as we do our quarterly calls and share more details as we get along in terms of the questions that you may have around some of the clients or margins or geo
Sreekanth Nadella
Thanks, everyone.
Speaking time
Sreekanth Nadella
15
Moderator
12
Nidhesh
5
Vivek Mathur
4
Madhukar Ladha
4
Abhijeet Sakhare
3
Uday Pai
3
Amit Murarka
2
Prayesh Jain
2
Mohit Surana
2
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Opening remarks
Amit Murarka
Thank you. Good day all. Thanks for joining this call at a very short notice. We have the management team of KFintech, Mr. Sreekanth Nadella, who is the MD and CEO; Mr. Vivek Mathur, who is the CFO; and me, Amit Murarka - Head IR. The purpose of this call is to give an update in terms of the transaction that KFin has just signed with Ascent Fund Services. I'll hand over the mic to Mr. Sreekanth to take you through the transaction and the deal. Over to you, Sreekanth.
Sreekanth Nadella
Thank you, Amit. Very good evening, good morning, good afternoon, depending upon which part of the geography you are in. Once again, my sincere thanks for joining on a very short notice. My team would have circulated some content around it. Today marks a very important day, very important moment and a milestone day, if I may, in the overall journey line of KFintech. As we have been articulating for a while now, our North Star, our vision had been and will continue to be the first large global fund administrator domiciled in India. In that context, today, we have a very important announcement to make, an announcement that we firmly believe is fully aligned, complements and supplements our vision to be one of the world's leading fund administrator over a period of time, delivering significant value to the fund managers, to the entire intermediary ecosystem, delivering through frugal engineering and highly innovative solutions and a workforce whilst strategic. Today, we have signed an agr
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