KFin Tech IPO: Risk Factors to Consider Before Investing

KFin Technologies is set to launch its initial public offering (IPO) on December 19. The company aims to raise ₹1,500 crore for the issue. The public issue will comprise an offer for sale only, by promoter General Atlantic Singapore Fund Pte Ltd. The issue will close on December 21.

There are, however, certain risk factors that one must consider before investing. There are lawsuits against the promoters and the company, among others.

Here are the risk factors to consider before investing:

1) The promoters of the company are under ongoing investigation by law enforcement agencies including the Enforcement Directorate (ED). The company had received a summons in September for MD & CEO Sreekanth Nadella. KFin Technologies has been issued a freeze order where shareholders Compar Estates and Agencies Private Limited, C. Parthasarathy– HUF and Rajat Parthasarathy have been directed not to alienate/sell/transfer/create any lien/liability in respect of the shares of the company

2) Legal proceedings are pending against the company, its subsidiaries, group companies and certain directors. There are three criminal proceedings, eight tax proceedings and one statutory or regulatory action against the company.

3) During the fiscal years 2020, 2021 and 2022 and the six months ended September 30, 2021 and 2022, the Company derived 53.30%, 53.69%, 53.05%, 54.99% and 50.82% of its operating revenue from its five largest customers, respectively, and the loss of one or more of these customers could have a negative impact on our business and prospects. Given that the Company depends on its limited number of customers for a significant portion of its revenue, any loss of one or more of these customers could have a negative impact on our business and prospects.

4) The Company’s current growth rates may not be representative of its future growth and if the Company fails to adapt to changing market trends, manage its growth or execute its strategies effectively, the Company’s business, financial condition and results of operations may be adversely affected.

Currently, the bulk of revenues come from domestic mutual funds. The market share of domestic mutual funds based on the number of clients, as reported by CRISIL, remained the same at 59% during FY2020 and FY2022 and the six months ended September 30, 2022

5) Any disruption to IT systems or data security breaches could harm the Company’s business and reputation. Although the Company has not experienced any data security breaches to date, such a breach could potentially harm the Company’s business and reputation and jeopardize its ability to provide reliable services to its customers.