Kotak Mahindra Bank to buy about 10% in KFin Technologies for ₹310 crore

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Kotak Mahindra Bank to buy about 10% in KFin Technologies for ₹310 crore
Kotak Mahindra BankBCCL
  • Post the deal announcement, Kotak Mahindra Bank’s shares rose to its highest in the last 12 months.
  • KFin Technologies claims to be a market leader in providing registry and transfer agent services to mutual funds in India.
  • The transaction is expected to complete by the end of October 2021.
Private sector lender Kotak Mahindra Bank has agreed to acquire a 9.98% stake in KFin Technologies for a cash consideration of ₹310 crore, the bank said in a stock exchange notification on Monday.

KFin Technologies claims to be the market leader in providing registry and transfer agent services to mutual funds in India. Besides asset management firms, it also provides similar solutions for alternative investment funds, wealth managers and corporates.

KFin serves 25 of the 44 asset management firms in India, and services 23 mutual fund and pension managers across Asia, including Malaysia, Philippines, Singapore and Hong Kong. It also serves over 300 AIFs schemes launched by over 100 fund managers, along with over 550 listed and more than 3,700 unlisted corporates with over eight crore folios in India, it said.

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AIFs are privately pooled investment vehicles established or incorporated in India, which collect funds from Indian and/or foreign investors. These include private equity funds, venture funds, social funds and debt funds operating in the country.

Besides, the company is also one of the two central record keeping agencies under the National Pension System in India, and is expanding in insurance transaction processing and fund administration, it said.

The transaction, termed as a financial investment by Kotak Mahindra bank, is expected to complete by the end of October 2021, it said.

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“At Kotak Mahindra Bank, this investment is in line with our stated strategy of making minority investments in businesses which are professionally managed and have deep client entrenchment. We are excited about the future growth prospects of the business and believe that an investment in KFin, with its significant franchise, will create long-term value for our stakeholders,” said Dipak Gupta, joint managing director at Kotak Mahindra Bank.

The development comes as American private equity fund General Atlantic, which currently holds 83.25% stake in KFin Technologies (formerly Karvy Fintech), plans to cut down its holding to almost half, according to a February 9 report by The Economic Times.

As of Dec. 31, 2020, the company had cash and bank balance of about ₹105 crore, according to an April 30 rating note by ICRA. But the company’s repayment obligations are “ballooning”, it said.

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“The company has ballooning repayment obligations with ₹52 crore, ₹80 crore and ₹220 crore due in FY2022, FY2023 and FY2024, respectively. KFin’s ability to generate growth while gradually expanding its margins will thus remain crucial,” the note said. ICRA, however, reaffirmed the company’s ratings at AA- (Stable).

As of March-end, KFin Technologies’ consolidated revenue stood at ₹486 crore, while it made a net loss of ₹64.5 crore, as per its latest financial disclosures. The company’s net worth fell 17% year-on-year to about ₹321 crore as of fiscal 2021.

Post the deal announcement, Kotak Mahindra Bank’s shares rose to its highest in the last 12 months to ₹2,024.95 by 11 a.m., on September 20, with its market capitalisation crossing ₹4 lakh crore.

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Kotak Mahindra Bank to buy about 10% in KFin Technologies for ₹310 crore
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