Can you tell me about the details of the KFIN Technologies IPO and if the IPO is worth invest in?

The company, KFIN Technologies has just filed the draft red herring prospectus (DRHP) with SEBI, and the approval for the IPO should only come in by the next 2 to 3 months. While the company is a fundamentally sound company, a lot will depend on the pricing of the issue. What we know at this point is that the IPO size will be Rs.2,400 crore and will entirely be an offer for sale, wherein General Atlantic Partners will take the partial exit and monetize the stake.

KFIN Technologies started off in the mutual fund registry business in the 1990s and it was originally a division of the Karvy group of Hyderabad. Later in the early 2000s, it become Karvy Computershare after Computershare of Australia took a stake in the company. In the year 2018, General Atlantic bought most of the stake and called it Karvy Fintech. However, after the Karvy scam in 2019, General Atlantic removed Karvy's name and changed it to KFIN Tech.

In terms of the holding structure, General Atlantic partners (one of the world’s leading private equity investors in the world) holds a 74.94% stake in KFIN Technologies. Another 9.98% stake in KFIN Technologies is owned by Kotak Mahindra Bank; acquired in the year 2021. KFIN provides services and solutions to mutual funds and private retirement schemes in Malaysia, the Philippines, and Hong Kong and is a leader in a number of funds serviced.

KFIN Tech services 25 out of the 42 AMCs and recently signed up with 2 AMCs yet to launch funds. It is also a strong franchise among alternative investment funds (AIFs), wealth managers, and also NPS and corporate clients in India. Out of the total number of AIFs present in India, KFIN services 270 funds of 157 asset managers with a 32% market share. Apart from all these, KFIN is also one of the two CRAs for NPS.

For the nine months ended December 2021, KFIN Technologies reported top-line revenues of Rs.458 crore and net profits of Rs.97.60 crore. This effectively translates into net profit margins or NPMs of 21.3%. KFIN Tech has appointed ICICI Securities, Kotak Mahindra Capital Company, JP Morgan India, IIFL Securities, and Jefferies India as Book Running Lead Managers (BRLMs) for the proposed IPO issue. Pricing details will come in later.