As his five-year term is almost near its end, Sreekanth Nadella, MD and CEO, KFin Technologies, talks about his journey with the company, its IPO and robust Q1 results this year. In an e-mail interaction with businessline, he says the stellar results have given the company a strong liquidity providing it the flexibility to capitalise on growth opportunities in the rapidly-evolving industry. “We’re actively exploring strategic acquisitions in the range of $50-75 million,” he adds. Edited excerpts:
You took over as CEO in 2020, before the IPO was launched. How has the journey been so far as your five-year term has almost come to an end?
The journey has been both exciting and rewarding. Since taking the helm in 2020, we’ve witnessed tremendous growth and transformation at KFin Technologies. We successfully navigated the challenges posed by the pandemic and emerged stronger, with our IPO marking a significant milestone in our journey.
Over these years, we’ve consistently outpaced industry growth, maintaining a CAGR of over 20 per cent in our core businesses. We’ve expanded our international presence, enhanced our technological capabilities and solidified our position as a market leader across various segments in India.
Both topline and PAT numbers show strong growth over the past few quarters. What has really led to this growth?
Our recent financial results demonstrate the strong momentum we’ve built across our business segments. In Q1 FY25, we saw a significant 57 per cent year-on-year jump in profit after tax to ₹68.07 crore, while our revenue from operations rose 31 per cent to ₹237.56 crore.
This can be attributed to several factors. First, we’ve achieved significant milestones across our diverse business segments, marked by substantial new client-wins. We’ve gained traction in new contract sign-ups, particularly in our fast-growing business lines such as global fund administration solutions (international), alternatives and wealth solutions, and technology solutions.
Our focus on technological innovation has allowed us to improve operational efficiency and offer superior solutions to clients.
International and other investor solutions revenues, too, are showing a healthy growth. Throw some light on this front.
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Our strategic focus on global expansion is yielding substantial results. In Malaysia, we’ve significantly expanded our client base, now accounting for a considerable portion of our overseas clientele. Meanwhile, in Thailand, we’ve completed crucial phases of contracts with a major bank, solidifying our position in the region.
The nature of our international business offers several advantages. We’re capitalising on the rising global trend of outsourcing RTA/FA work, which allows us to provide comprehensive services across fund set-up, administration and regulatory compliance.
To further accelerate our international growth, we’re actively pursuing strategic mergers and acquisitions. These initiatives aim to extend our reach into new markets, including the US, Europe and West Asia, diversifying our global portfolio and enhancing our service offerings.
According to latest figures, cash and cash equivalents stand at nearly ₹500 crore. Are you building a war chest for inorganic growth?
Our robust cash position of nearly ₹452 crore, as on June 30, 2024, is indeed a strategic asset for KFin Technologies. .
While we don’t typically discuss specific plans, this strong liquidity provides us with the flexibility to capitalise on growth opportunities in our rapidly-evolving industry. We’re actively exploring strategic acquisitions in the range of $50-75 million.
Our focus remains on expanding our global presence and enhancing service offerings. We’ve already established a significant footprint in the South-East Asian countries and are managing critical funds in Canada. Our goal is to become a leading global fund administrator, tapping into the $10-billion annual revenue industry where Indian fund administrators currently have a minimal share.
This cash position allows us to pursue both organic growth and strategic acquisitions that align with our vision of setting new benchmarks in the industry.
There are some expectations for liberal dividend from your company. Any view on this?
Regarding dividends, our approach is to balance shareholder returns with the investments required for sustainable long-term growth. Our board regularly reviews our dividend policy, considering our financial performance, cash flow, future capital requirements and market conditions.
However, we’re in a phase of significant expansion, particularly in our international operations and digital service offerings.
We see immense potential in the global fund administration market, which is currently $10-billion revenue pool. Even capturing a small percentage of this market can generate substantial revenue. We’re also investing heavily in technology solutions like XAlt, our SaaS platform for alternative investment funds, and mPower Wealth, the next-generation platform for global wealth managers.
These growth initiatives require substantial investments, which we believe will generate superior long-term value for our shareholders. That said, we remain committed to delivering value to our investors.
What are the near-term challenges or opportunities for the company?
In terms of opportunities, we see significant potential in the growing financialisation of the Indian economy and the expansion of demat accounts. The surge in IPOs and inflows into capital markets through systematic investment plans will positively impact all our core businesses. Internationally, the global fund administration market represents a substantial opportunity, with global alternative AUA (assets under administration) expected to grow to $23.3 trillion by 2027.
On the technology front, we’re excited about the potential of tokenisation to extend financial services to the last mile. We’re also investing in RegTech and SupTech to ensure regulatory compliance as the financial sector evolves.
Challenges include navigating the rapidly-changing technological landscape and ensuring we stay ahead in terms of innovation. Cybersecurity and data privacy remain top priorities, and we must continue to invest in these areas to maintain our high standards of data protection.
Additionally, as we expand internationally, we need to adapt to diverse regulatory environments and market dynamics, which requires continuous learning and adaptation.
You have handled many IPOs in your tenure. Which is the most memorable IPO launch?
One of the most memorable IPOs was the LIC of India’s, the largest in India’s history. It required meticulous planning to handle five crore applications, with a seamless T+3 timeline, robust cybersecurity and mock-runs ensuring smooth execution. We established a 24/7 war room for real-time coordination with exchanges and regulators, and innovative communication, including regional language WhatsApp messages, enhanced investor engagement. A dedicated help desk and scaled contact centres further supported the process.
Another significant milestone was the recent Bajaj Housing Finance IPO, where we processed over one crore applications with an oversubscription of 67.88 times and a total subscription amount of ₹3.24 lakh crore. Our systems handled an impressive 1.8 crore hits, with peak traffic reaching 16.5 lakh hits per hour and processing 1,300 requests per second. Despite this massive load, our technological infrastructure ensured seamless operations, with latency as low as 0.84 ms. We successfully completed reconciliation and allocation on T+1, crediting shares to 17.86 lakh allottees, reaffirming KFintech’s leadership in managing high-volume offerings with precision and efficiency.