KFin Technologies Aims Over 20% CAGR In Next Three Years, Eyes Global Expansion

KFin Technologies Ltd. expects to continue growing its profit and revenue at more than 20% in the next three years, according to Chief Executive Officer Sreekanth Nadella.

In a conversation with NDTV Profit on Wednesday, he emphasised KFin's five-year journey toward global leadership, drawing parallels with India's IT boom in the late 1990s.

"The top line had been growing at a CAGR of 25% and the bottom line too had been at both the PAT and Ebitda levels," he said. "We have completely cleared out our debt. In that context, we can continue growing at a similar pace as we have done in the past four to five years."

While the mutual fund segment, which constitutes the largest portion of its domestic business, is expected to grow in the "late teens", other domestic areas like alternatives, pensions, private retirement schemes and pure-play tech solutions are projected for much higher growth, potentially "up north of 35–40% year-on- year", according to Nadella.

Its international segment, contributing 5% to 6% to the top line, has surged at a compound annual growth rate of 60%. The recent acquisition of Ascent Fund Services is expected to push international revenue to 25% of the total earnings, with a goal of reaching 40% to 50% within five years.

In India, KFin commands almost 60% share of asset management companies and about 35% of total AUM, up from 26% in 2018. "That is a 100-basis-point expansion every half a year on a market, which itself has more than tripled in the last six to seven years on the overall AUM," he said.

Adjusted for blended yield, the share of AUM stands at over 40%, he said. The blended yield is a financial metric that is used to combine multiple rates or yields to derive an average figure.

The market share of systematic investment plans, a sticky retail segment, stands at 42%. "We have always seen that the total AUM trends towards the market share of SIP, which means that there is a possibility that over the next couple of years or more, the trend line between the total 34% and 35% of our overall AUM trending towards 40% is strongly possible," he said. 

The CEO underlined that KFin's ability to expand its market share was pretty limited. "We merely service the mutual funds that are sold by our clients. So, when you talk about our market share, you are talking about the combined market share of all of our clients put together," he added.

Nadella said several of the asset management companies take up north of four to six years to establish their credit and grow much faster. "We are at that inflection point with several of our AMCs. We believe we are going to outperform the industry and that will improve our market share," he said.

Nadella described yield compression as a "normal business parameter" and one that he was not worried about. He compared it to a volume-driven discount.

"We are always passing on some scale benefits to the AMCs in the form of yield. What is an important metric to track is your increase in AUM and overlay that with the decrease in the basis points. And when you take a look at all of those factors put together, are you still able to grow at close to about 20% is the metric," he said.