Initial Public Offering (IPO) of KFin Technologies Ltd, opened on Monday and was subscribed 55% on its first day. The day 1 was driven by response from qualified institutional buyers, retail investors, and non-institutional investors. The issue will close on Wednesday.
The company intends to raise ₹1,500 crore through the issue that is entirely an offer for sale.
The issue is priced at ₹347 to 366 per share, and the minimum order quantity is 40 shares.
The tentative date of the company's listing is December 29, and the shares are proposed to be listed on BSE and NSE.
ICICI Securities Ltd, Kotak Mahindra Capital Company Ltd, and J.P. Morgan India Private Ltd are the book running lead managers of the public issue.
On the back of the company's robust financial track record both in terms of revenue as well as margins, brokerage Chola Securities Ltd is bullish on the issue. The brokerage stated in its analysis that it views the company's asset-light, service-based business model to be appealing from the standpoint of profit generation.
"KFin is proxy play to Mutual fund industry growth in India. It is priced in lines with leader in the industry CAMS, which is 39-times price to earnings. We thus advise investors with a long term investment horizon to 'Subscribe' to the issue," added the brokerage.
Brokerage Sushil Financial Services Pvt Ltd is of the opinion that investors with cash surpluses can make long-term investments.
According to the brokerage, the issue is priced at a Price to Book Value Ratio (P/BV) of 8.33 based on its Net Asset Value (NAV) of 43.96 rupees as of September 30, 2022. At the higher price band of 366 rupees, the IPO is priced at 39x at FY22 earnings.
"If we annualise HYFY23 earnings, then the asking price is at a price-to-earnings (P/E) of around 36x. There is only listed peer Cams trading at P/E 39x and industry average P/E is 39x. Hence, KFintech IPO share price is fully priced. Based on current financials, the issue seems fully priced," said the brokerage.
In terms of the valuations, on the higher price band, brokerage Ashika Stock Broking Ltd, believes that the company demands a P/E multiple of 35.9x based on H1FY23 post issue fully diluted earnings per share (EPS), and P/B multiple of 8.3x based on H1FY22 post issue fully diluted book value.
According to the brokerage's assessment, there isn't much room for listing gains because CAMS trades at 39.7x above H1FY23 EPS (annualised), and the issue is fully priced.
Additionally, 14.12% of the company's equity share capital is still held by the former CP group, which includes C. Parthasarathy, Rajat Parthasarathy, Compar Estates and Agencies Private Limited, and C. Parthasarathy - HUF (Karta - C. Parthasarathy). However, these shares are subject to encumbrances in favour of CP Group lenders, which ED may decide to liquidate in the future, putting pressure on share prices.
"Investors are advised to invest in this company when there is valuation comfort post listing. Hence, we have a ‘neutral’ rating on the issue," said the brokerage.
KRChoksey Shares and Securities Pvt Ltd too has recommended 'neutral' rating for the IPO. The brokerage considers the current valuation of 38.8x to be fully valued and on pace with its peers, and believes that the company has significant scope for growth, considering its diverse product profile and extensive client base.
Additionally, it believes that the company will keep its operating margins at a level that is sustainable, resulting strong earnings and return ratios.
