General Atlantic to exit KFIN Technologies via IPO

The much talked about KFIN Technologies IPO is all set to happen next week. The IPO is slated to open on the coming Monday, 19th December 2022 and close for subscription on 21st December 2022. Currently, General Atlantic holds over 75% of the equity in KFIN Technologies Ltd and is the largest shareholder. Kotak Mahindra also has a 10% stake in the company. The size of the IPO is expected to be around Rs. 2,400 crore and the entire IPO will be by way of offer for sale (OFS), wherein General Atlantic will be taking substantial exit in KFIN Technologies. The company is overall valued at Rs. 6,500 crore or thereabouts.

There is an interesting history to KFIN Technologies. It started off as the registry arm of the Hyderabad based Karvy group and was originally christened as Karvy Computershare after the Computershare of Australia took a key stake. Later, General Atlantic made an entry into Karvy Computershare and became the largest shareholder. However, the name continued to remain Karvy Computershare till 2019. Later in 2019, when the Karvy scam broke out after the group had illegally transferred client shares into its own account, it was banned from the capital markets. At that point, General Atlantic had insisted on removing the Karvy reference at all levels, and that is when the name was changed to KFIN Technologies Ltd.

As one of India’s leading players in the registry business, it has some formidable numbers. For example, 27 out of the 46 Indian AMCs use the services of KFIN Technologies as the registrar. It is ranked Number One in corporate registry services catering to over 600 listed and over 3,000 unlisted corporates. It currently services over 13 crore folios in registry business. Apart from being the registry to shares and mutual funds, KFIN Technologies is also the registrar to over 300 AIFs (alternate investment funds). Above all, KFIN is also one of the two players providing central recordkeeping services for the National Pension System (NPS) of the government of India.

Not much is known about the valuations but it is estimated that the IPO could peg the valuation of KFIN Technologies at closer to Rs. 6,500 crore. Ahead of the IPO opening, the company is likely to offer shares for anchor placement on Friday, 16th December 2022. There will be no fresh issue component, so no fresh funds will come into the company. The total OFS would mean the IPO would be a transfer of ownership from General Atlantic to a much wider base of investors to facilitate listing. Hence there will not be any dilution of equity or of EPS due to the public issue. Kotak Mahindra had acquired 10% stake at Rs. 310 crore and that is now likely to be valued at closer to Rs. 650 crore. Kotak will not be exiting.

The company has already put in place a formidable issue management team for the IPO. The issue will be lead managed by ICICI Securities, Kotak Mahindra Capital, Jefferies, IIFL Securities and JP Morgan, who will act as the book running lead managers (BRLM) to the IPO. The company has also roped in two of the leading legal firms in India; AZB & Partners and Shardul Amarchand Mangaldas as the legal advisors. This comes a few years after the other major registrar in India, CAMS (Computer Age Management Services) had come out with its public issue. CAMS is owned by another private equity (PE) firm; Warburg Pincus.

KFIN Technologies broadly caters to the registry needs of asset managers spanning mutual funds, AIFs (alternative investments), pension, wealth managers and corporates. It has a strong client footprint in India and abroad. KFIN has also fine-tuned its technology proposition and offers SAAS-based end-to-end transaction management, channel management compliance solutions as well as high end and value-added data analytics. KFIN also has a registry footprint in Malaysia, the Philippines and Hong Kong. In terms of mutual funds AUM, CAMS manages 69% of the total MF AUM while KFIN manages more number of mutual funds, with a 60% share in terms of number of AMC clients.