KFINTECHNSEQ4 & FY'25May 06, 2025

Kfin Technologies Limited

12,031words
82turns
10analyst exchanges
4executives
Management on call
Sreekanth Nadella
MD & CEO
Vivek Mathur
CFO
Amit Murarka
HEAD IR
Devesh Agarwal
IIFL CAPITAL SERVICES LIMITED
Key numbers — 40 extracted
Rs.283 crore
cial highlights, the quarter that had gone by: Our revenue from operations stood at roughly about Rs.283 crores, up 24% year-on-year. In Indian Mutual Fund business, obviously had seen a slight degrowth quart
24%
he quarter that had gone by: Our revenue from operations stood at roughly about Rs.283 crores, up 24% year-on-year. In Indian Mutual Fund business, obviously had seen a slight degrowth quarter-on-qua
6.5%
ar it continues to swell up. Overall, international and investor solutions growth has been around 6.5%. I will call out more specifically in terms of a consolidation of global business solutions
27%
h was erstwhile a mortgage business. If not for consolidation, our overall growth stands at about 27% and the overall full year growth of the international business stands at about 46%. Our EBITDA
46%
tands at about 27% and the overall full year growth of the international business stands at about 46%. Our EBITDA stands close to about Rs.122 crores, it's up nearly 17% and a margin at about 43.2%.
Rs.122 crore
year growth of the international business stands at about 46%. Our EBITDA stands close to about Rs.122 crores, it's up nearly 17% and a margin at about 43.2%. The PAT itself has been around Rs.85 crores and
17%
al business stands at about 46%. Our EBITDA stands close to about Rs.122 crores, it's up nearly 17% and a margin at about 43.2%. The PAT itself has been around Rs.85 crores and it's up about 14.5%
43.2%
out 46%. Our EBITDA stands close to about Rs.122 crores, it's up nearly 17% and a margin at about 43.2%. The PAT itself has been around Rs.85 crores and it's up about 14.5% and a margin remains at abou
Rs.85 crore
out Rs.122 crores, it's up nearly 17% and a margin at about 43.2%. The PAT itself has been around Rs.85 crores and it's up about 14.5% and a margin remains at about 30% broadly. So, in terms of the overall
14.5%
ly 17% and a margin at about 43.2%. The PAT itself has been around Rs.85 crores and it's up about 14.5% and a margin remains at about 30% broadly. So, in terms of the overall quarterly performance, i
30%
The PAT itself has been around Rs.85 crores and it's up about 14.5% and a margin remains at about 30% broadly. So, in terms of the overall quarterly performance, it's in relation to whether it is the
2%
terms of the overall growth year-on-year and even quarter-on-quarter, it is minor tip of at about 2% in terms of revenue and similarly on the margins. The full financial year highlights: Of course
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Guidance — 20 items
The full financial year highlights
opening
“There will be minor plug-ins which may still continue to evaluate.”
The full financial year highlights
opening
“DTA stands for the Distributor Transfer Agency as well as the end-to-end transfer agency and fund accounting for the trustee, which means that all the asset management companies who roll up under that trustee will be serviced end-to-end by KFintech.”
The full financial year highlights
opening
“And these two entities together will be able to provide a full suite of service to any asset class to any country in the world.”
The full financial year highlights
opening
“Broadly, in terms of the overall industry performance itself, you have seen some of the charts clearly speak about FY'25 was a breakout year by any stretch of imagination called the Indian Mutual Fund industry spectacular growth overall nearly 25% year-on-year if you compare to the previous year, notwithstanding the reduction in the Q4 of the previous year, else they would have ended on a much, much more robust manner.”
The full financial year highlights
opening
“And another large TA deal in Philippines, we have onboarded three new funds and GIFT City taking our total funds to close to 30, making our market share close to about 50% of the GIFT City funds and with Ascent Fund Services should we include that obviously our market share will be far superior to that.”
The full financial year highlights
opening
“We intend to get to three-fourths of the total market share in the GIFT City with the combined strategy of one plus one equaling 10 in some sense.”
The full financial year highlights
opening
“But this year, FY25, saw the first year in the last four years both mark-to-market gain as well as net inflows, which means that the revenue hopefully from now on will be on account of both new wins and more importantly on the back of the expansion of the AUM of the current clients.”
Vivek Mathur
opening
“That's 660 crores of cash, which will be utilized towards payout of dividend that the board has recommended subject to shareholders’ approval of Rs.7.50 per share and the acquisition of initial 51%, about Rs.305 crores will also be funded out of it.”
Vivek Mathur
opening
“We have seen a healthy increase in EPS, about 34% increase versus last year and we believe that in times to come with the acquisition of Ascent at least for FY'26 it will be neutral and from FY'27 we believe it will be value-accretive.”
Karthik Chellappa
qa
“In your opinion, what is driving the strength and is this something that we can expect to sustain in FY26?”
Risks & concerns — 10 flagged
We continue to maintain our position about risk management being one of the most effective strategies this organization has adopted and will continue to do so.
— Sreekanth Nadella
Risk management from the standpoint of not being a single asset class, single country, single business process entity but to diversify into multiple asset classes, multiple business processes and into multiple geographies.
— Sreekanth Nadella
That ensures the businesses which are not linked to mark-to-market movements continue to grow beyond 20% to be able to provide that amount of hedge and risk management and diversity should there be a sideward or a downward movement of the markets.
— The full financial year highlights
I believe and I continue to believe that that is probably the most important metric to track to which over a period of time would drag up or drag down the overall AUM market share because SIP market share is the one that truly is the resilient, sticky and retail investment folios unlike large, lumpy investments which come from corporates, which tend to have a sporadic impact in terms of market share, but they can dissipate rather quickly.
— The full financial year highlights
There is some impact of M&A due diligence cost of about Rs.12 crores that we incurred during the year which has reduced the EBITDA, otherwise it could have been about 31.5 in terms of the growth and the EBITDA margins which are 43.9% for the year would have been about 45% for the year but for this Rs.12 crores that we had to incur to do a due diligence, and for the quarter, which is 43.2% would have been about 46%.
— Vivek Mathur
But I can assure you in terms of how difficult it is for legacy companies to be able to deliver those as frugally as we can.
— Sreekanth Nadella
Just extending the question on BlackRock of the previous participant, what is the kind of concentration today amongst the eight other players that you have mentioned and which is there in the public domain -- is there concentration there and a couple of them have say 80%, 90% shares today and so it's kind of difficult to entrench into that kind of a domain?
— Prayesh Jain
On the BlackRock, I do not believe there is any concentration risk.
— Sreekanth Nadella
The concentration risk does not impact our ability to win.
— Sreekanth Nadella
So, one, there is no huge concentration risk.
— Sreekanth Nadella
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Q&A — 10 exchanges
Q
Thank you very much for the opportunity, sir. Congrats on the quarter. Just two questions from my side. First is on the other expenses. Apart from the due diligence, was there any other chunky expenses in this quarter because the YoY growth seems to be pretty high, and if we could sort of breakdown what portion of the other expenses would you attribute to investing in growth versus maintenance? That's my first question.
Vivek Mathur
There are expenses related to cloud expenses and licenses that we have incurred in terms of expansion and balancing strategy between on-prem to cloud, which is a similar increase about Rs.12, 13 crores extra that we have incurred to ramp up in terms of IT strategy. We are looking at optimizing the cloud strategy with on-prem and this is something which we are developing the entire core chassis based on the latest technology. And overall we believe that 19% of the total revenue that we have spent on IT in the current year vis-à-vis 21% last year, will continue to come down in the coming years.
Q
Thanks for the opportunity. My first question is on the KRA business, what is the update there, when are you planning to launch that? And a connected question to that is, KFin has moved into different lines, different categories, different products, wealth being one, you're talking about how you're expanding value added services on the Issuer Solutions like that being other. Globally, we have seen that RTAs or platforms like KFin are able to get into non-financial categories as well like healthcare or others. Is that an ambition for KFin as well and what are the other blank spaces that you cou
Sreekanth Nadella
Sure. The first question in terms of KRA business, so we have in the previous quarter updated that we received in-principle approval from SEBI for the KRA business. We have completed our platform build at this point in time. We are awaiting SEBI's final approval. Our readiness at this very moment is we are literally a minute away from launching our KRA Solutions the moment we get approval from the regulator. So, our preparedness is absolutely done and we believe it's a matter of time and hopefully into this quarter we should have started our KRA business. Related to that is in terms of your qu
Q
Hey. Hi. Good morning, everyone. I have a couple of number questions. First is if you could break down the international alternatives pension bit into the sub-segments? Second one is that in the balance sheet I see a non-current asset held-for-sale item. It's not a big number, but just curious what that relates to? And third one is a broader question which is on the international side and the alternative side if it's possible to quantify the sales pipeline? And then secondly, again, I think it's been discussed earlier as well, but if you could talk about the competitive environment in those ma
Vivek Mathur
Sure. Sreekanth, I will pick up the first one on the breakup of the international other investor solutions. Also take the last one on the balance sheet item. Break up for the international piece within the overall pie is about in FY24 was Rs.119 crores and this year is about Rs.156 crores, and international is about Rs.48 crores and AIF is about Rs.58 crores, Webile is about Rs.12 crores, NPS is about Rs.11 crores and GPS is Rs.27 crores. Same thing last year international was Rs.36 crores, AIF was Rs.34 crores, Webile was Rs.5 crores, NPS was Rs.8 crores and GPS was Rs.34 crores. On the quest
Q
Thank you for the opportunity sir. So, basically you and CAMS are continuously investing a lot in the technology space, right. So, how your technologies can be different from CAMS?
Sreekanth Nadella
So, there are areas where we compete. There are areas we collaborate, for example, we collaborate on MFCentral, we compete with each other on mutual funds and alternatives. But as you know, KFintech also is in other businesses and likewise CAMS is also in businesses where KFintech is in. Technologically, one we both use different tech stack. Altogether we are on Microsoft and if my knowledge serves me right I believe CAMS is on Oracle. In terms of the operating model, it could be slightly different. It's not right for me to comment how they operate. I mean I only have as much insights into it.
Q
Hi, thank you. Just three questions. One is any mutual fund contracts that up for renegotiation in FY26 that we should watch out? Second, I think there was a previous question on the international deal pipeline. I am not sure if you disclose that. So, the deal pipeline for yourselves and for Ascent, if you can disclose that? And lastly, the Rs.12 crores M&A expense was that all in 4Q or was it distributed between 3Q and 4Q? Thank you.
Vivek Mathur
I will answer the last question then Sreekanth you can answer the first one. The M&A expense is broken up into two quarters, Q3 and Q4. Our KFintech deal pipeline in Southeast Asia is close to about $25 million at this point in time. And the conversion rate if you saw in the last six months had been pretty solid with nearly seven large deals to have been signed and that number of $25 million is consistently increasing. I have not included the Thailand market in that number just yet. Given we have gone live, and we are in the process of now looking at nearly the entire market and to add that to
Q
Yes. So, just a few questions. First, on the employee expense growth number for FY2025, would it be possible for you to kind of break this number between fixed cost inflation, new employee additions and maybe others in terms of more deployment on the sales side or business development side or product side? Second would be when we look at the Issuer Solutions business, this year obviously the folio growth has been quite strong. So, again, I mean if you can break it up between primary activities driving this folio addition versus more companies that you're getting from competition and maybe othe
Sreekanth Nadella
I will cover, and I sincerely request everyone to limit with the few questions, Vivek, you can cover the item on the cost. On the Issuer Solutions, the total folio addition in the previous year was 9 million folios, which is pretty robust. And I think with the exception of one specific transition, nearly all of it is organic, which means that it is all the folios that have been added for the companies we have been servicing for the past bunch of years. The IPOs that have happened, obviously, they happened through the years. So, the full annuity value of it only will come into 2026, this year t
Q
Yes. Thank you for the opportunity. Sir, a couple of questions. Basically as the Ascent gets integrated with us, say in last part of the current year and maybe fully for the next year, so is it fair to say that given the EBITDA margins of that Company are lower and to start with, so our EBITDA margins which are closer to 44 will fall below 40 for a while before it inches back to 44 kind of a number, is it a fair assessment to do so?
Sreekanth Nadella
Mathematically, absolutely, yes, it will. But again, keep in context, the total revenue profile is roughly $18 million and KFintech's total revenue into the coming year obviously is going to be much, much higher. So, the impact will be marginal at a percentage level, but at an absolute number level, it won't be dilutive. Got it. And you said a couple of mutual funds will come for repricing. I just wanted to understand if I calculate the yield came for the full year around 3.63, so you see a contraction to be meaningfully higher or it will be naturally a telescopic pricing impact to play out in
Q
Yes. Hi, good afternoon. Thanks for taking my question. I have just one question on the BlackRock Aladdin platform. You mentioned in the presentation that you have presence in Canada. US is not mentioned yet. So, just want to understand from a licensing perspective and a go-to-market perspective where are you as a Company and would you require those licenses and would you go ahead and acquire for those licenses?
Sreekanth Nadella
Sure. So, KFintech has clientele in Canada, right and hence Canada is mentioned, US is not mentioned because we do not have any clients in the US. BlackRock of course is not our client. We are their preferred partner by virtue of formally getting onboarded by BlackRock in the month of late January this year. We by virtue of being a preferred partner for BlackRock to implement Aladdin and Aladdin as things stack today has roughly about $20 trillion of global funds which means that we as one of the preferred partner, has access to compete and win any of the fund managers who have currently onboa
Q
Yes. Hi! Just a couple of questions. Just extending the question on BlackRock of the previous participant, what is the kind of concentration today amongst the eight other players that you have mentioned and which is there in the public domain -- is there concentration there and a couple of them have say 80%, 90% shares today and so it's kind of difficult to entrench into that kind of a domain? That would be my first question. Second is on VAS. The share has gone down sequentially in this quarter. Anything to read into it or is there a seasonality there or what kind of will transpire there? And
Sreekanth Nadella
On the BlackRock, I do not believe there is any concentration risk. Many of them have large portfolios that they are managing. The concentration risk does not impact our ability to win. I think we need to keep in mind that these funds are not domiciled in any one country. And as a fund manager and as a fund administrator, let's take any fund X, right, and if that fund is currently based in Cayman Islands, tomorrow, they can start something in Ireland, they can start in Dubai, they can start in Abu Dhabi, they can start in India in GIFT City, so on and so forth. And as you move and set up funds
Q
Thank you, Steve. On behalf of IIFL Capital, I thank the KFin management for giving us an opportunity to host the call today. Before we conclude the call, Vivek, would you like to add any closing remarks.
Vivek Mathur
Thanks, Devesh. I think past year was a year which was filled with growth and getting into new businesses like KRA and getting into new geographies with Ascent coming in. We continue to maintain guidance of 18% to 20% top line growth and 40% to 45% of EBITDA margin. While we will see the integration of Ascent in the coming three, four months we believe that it will be neutral in terms of EBITDA margin impact, and it will become accretive in FY27 and we will put all of our efforts in terms of making sure that the diversification is balanced from the management side in terms of the time and atte
Speaking time
Sreekanth Nadella
28
Moderator
12
Vivek Mathur
7
Sanketh Godha
7
Pranuj
4
Kshitij Saraf
4
Prayesh Jain
4
Devesh Agarwal
3
Karthik Chellappa
3
Sarthak
3
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Opening remarks
Devesh Agarwal
Thank you, Steve. Good morning, everyone, and welcome to the Q4 FY'25 Earnings Call of KFin Technologies Limited. Today, from the Company we have with us Mr. Sreekanth Nadella – M.D. and CEO; Mr. Vivek Mathur – CFO; and Mr. Amit Murarka – Head of Global Business Finance, M&A and Investor Relations. I would now hand over the call to “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 so very much, Devesh and very good morning and warm welcome to all the listeners. It gives me great pleasure to be back once again in front of you calling out the financial performance of the organization. I will give out some qualitative information beyond what is obviously visible. Your organization continues its resilient performance quarter-after-quarter. As the saying goes tough times, don't last, but tough men do. A quarter that saw a significant erosion on assets under management, maybe even to a certain extent investor confidence in the overall market, KFintech continues to deliver to a resilient performance with its very diversified portfolio of solutions and services. We continue to maintain our position about risk management being one of the most effective strategies this organization has adopted and will continue to do so. Risk management from the standpoint of not being a single asset class, single country, single business process entity but to diversify into mul
The full financial year highlights
Of course stand at about we crossed the Rs.1,000 crores turnover threshold close to about Rs.1,100 crores, up nearly 30% year-on-year and nearly every line of business has clocked about 30% growth, whether it is pensions or whether it is mutual funds, international, so on and so forth. We continue to stay extremely focused on our approval engineering delivery capabilities, delivering cost efficiencies, driving productivity. We have begun our initial journey of embracing artificial intelligence. I will speak about that a little bit more later in terms of how we foresee that to help in terms of driving revenues, our customer centricity as well as optimizing the cost structures along the way. We have cash and cash equivalents as of 31st March close to about Rs.660 crores and dividend of Rs.7.5 per share has been declared by the board and subject to shareholders’ approval shall be disseminated so. Overall, in terms of the business, the biggest highlight KFintech has had to offer, which man
Vivek Mathur
Thank you, Sreekanth. On the overall revenue performance, while Sreekanth talked about that, we have grown 30% year- on-year and Q4 last year versus this year, we have grown about 24% sequentially, there is a degrowth of 2.5% largely driven by the mark-to-market correction that happened and some bit of corporate actions, Issuer Solutions, which had given a reduction of 3% in the Issuer Solutions revenue sequentially, but overall a robust performance, we have crossed Rs.1,000 crores in terms of revenue. The breakup of revenue is more like mutual fund, fee-based revenue continues to be in the range of about 64%, the Issuer Solutions revenue is 15% of total revenue, the international and other investor solutions revenue is about 14% of total revenue. Within that, now international business continues to be about in the range of about 5% to 6%. And we believe that the trajectory in terms of international business contribution will change with the acquisition of Ascent, which currently is ab
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