KFin performed brilliantly during the most recent bull run, gaining 300% between December 2022 and 2024. However, as the market began to correct, the stock was detailed, leading to a 40% correction so far in FY25 despite a stellar third-quarter performance.
The current stock price factors in a potential earnings slowdown as the market correction is expected to hamper its growth. Nonetheless, the main question is how the stock is positioned post-correction. Let’s decode this.
Backbone of the mutual fund industry
An RTA acts as an agent who connects investors with asset management companies (AMCs). It offers record-keeping and backend data-processing services to AMCs, as well as value-added services such as distributor management and call centre services.
AMCs depend heavily on RTAs to service clients so they can concentrate on core operations. Switching RTAs is complex due to the high integration cost. This is why AMCs foster long-term partnerships with RTAs, giving them a stable revenue source.
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So far, there has been only one instance of an AMC changing its RTA. Franklin Templeton changed its RTA provider from KFin to CAMS in 2021.
Entry barriers to this business are extremely high, yet RTAs face constraints on bargaining power. This is because they are tightly regulated and their clients—mutual fund houses—enjoy significant leverage in pricing.
Strong potential, but regulations limit returns
RTAs’ revenues depend on the size of their assets under management (AUM) as their income is tied to the serviced AUM and the fees (yields) they charge. These fees are linked to the total expense ratio (TER) that AMCs charge.
TER varies by asset class and scheme and is tightly regulated and monitored by Sebi. TER has a tiered pricing structure, meaning that as AUM increases, the yield decreases. Active and hybrid mutual funds have the highest fees, while passive funds have the lowest.
KFin trails CAMS in the RTA space
KFin is India’s second-largest RTA after CAMS, with a 32% share of average assets under management (AAUM). It has a 40% market share in monthly SIP inflows.
The RTA segment is the company’s biggest revenue driver, contributing 69% ( ₹577 crore) of its FY24 total revenue of ₹838 crore. In addition, it has a revenue market share of 36%.
It manages the AUM of 25 of the 47 domestic AMCs in India and had a total AAUM of ₹17.4 trillion in FY24. Of the total AUM, 58% ( ₹10 trillion) comes from equity while the rest comes from non-equity.
KFin outpaces industry in mutual fund AUM growth
The company is the biggest beneficiary of the increasing financialisation of savings in India. Its growth has been faster than that of the industry, causing its share price outperforming that of CAMS.
Between FY20 and FY24, its overall AAUM grew at a 19% CAGR to ₹17.4 trillion, outpacing the industry’s 15% CAGR. Its equity AAUM expanded at a 23% CAGR, faster than the industry’s 22% growth. Equity AAUM is expected to grow at a 31% CAGR between FY24-FY27E, according to Motilal Oswal.
Greater exposure to smaller AMCs
This industry-leading growth is due to KFin’s higher exposure to smaller AMCs, which have higher-than-industry exposure to high-yielding equity and balanced AUM. This is in contrast to CAMS, which services four of the top five AMCs, representing 56% of total industry AUM, according to Nuvama.
Thus, KFin earned a higher yield (0.038%) in FY24 than CAMS (0.029%). Since smaller AMCs typically have higher TERs, KFin benefits from better yields. However, the yield will gradually decrease over time.
Long-term compounder, but…
KFin is in a favorable position to capitalise on rising mutual fund penetration, which currently stands at 17%, significantly lower than the global average of 65%, affording KFin and CAMS headroom for growth.
According to the Association of Mutual Funds in India (AMFI), total mutual fund AUM stands at ₹67 trillion as of January 2025. It’s expected to grow to ₹100 trillion by 2030, according to DSP Mutual Fund.
There is also a growing preference among investors for low-cost passive funds. The share of passive funds in industry AUM has grown from 7.4% in March 2020 to 16.6% in December 2025. It is expected to grow to 25-30% of total AUM by 2030, as per DSP.
As a result, rising AUMs due to tier-based expense ratios and passive funds will reduce mutual industry TER, making it difficult for KFin to maintain its yield. MOFSL expects KFin yield to decline to 0.036% by FY27.
New AMCs offer an additional growth lever
A growing number of AMCs are either awaiting or have already received approval from Sebi to launch mutual funds. They will likely choose between KFin and CAMS. However, CAMS secured five of the last seven AMC mandates, leaving only two for KFin.
Nonetheless, the rise in the number of AMCs bodes well for KFin. It earns annuity-like revenue from the assets it manages, which gives stability to its financials. Its revenue from RTA services grew 19% year-on-year to ₹5,769 crore in FY24. According to MOFSL, it is expected to grow at a CAGR of 22% between FY24 and FY27.
KFin leads in company issuer solutions
KFin’s issuer solutions segment handles folio creation and transaction processing for IPOs, FPOs and other offerings. It also provides registrar and share-transfer services and corporate action management.
The segment is fragmented, comprising 77 players as of Q3FY24. However, three players – KFin, Link Intime and BigShare Services – dominate. KFin serves 6,071 corporate clients, up by 708 in FY24.
This segment contributes 13% ( ₹110 crore) of its total revenue, giving it a market share of over 65%. Its share in terms of the market cap of Nifty 500 companies is 46%.
Unlike in the mutual fund RTA business, where revenue is linked to AAUM, in the company RTA business it is linked to the number of folios. Notably, the number of folios grew at a CAGR of 16.5% between FY20-24 to 12.4 crore, up by 1.4 crore in FY24.
Revenue growth in this segment is expected to be led by increased company listing (listed firms contribute more revenue than unlisted companies) and increased folio count as retail participation rises. MOFSL expects issuer services revenue to grow at a 20% CAGR during FY24-27.
Growing presence in International issuer solutions
This segment contributes 11% ( ₹88 crore) of KFin’s revenue. In 2016 it entered the international market after acquiring the RTA business from a German Bank in Malaysia. KFin then increased its client base to 57 in FY24, up by 16 compared to last year and from eight in total in FY17.
This segment has plenty of potential as the total AUM in Southeast Asia is 2.5 times higher than that of the domestic MF industry. It managed an AUM of ₹6,090 crore with 3.6 million transactions in FY24, up from 0.9 million in FY20. Recognising the potential, the company wants to expand to Singapore, Thailand and Gift City. It also has a presence in Canada and the Middle East.
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This segment offers better unit economics, pricing power, higher yields, and higher AUM, leading to operational leverage. Given its vast potential to add more clients and expand internationally, Motilal expects a 37% revenue CAGR over FY24-FY27.
Other investor solutions: Emerging and rapidly growing segments
KFin also operates in high-growth segments in alternatives and wealth management (WM), with a market share of 36.3% in FY24. It has a market share of 8.3% in the National Pension Scheme (NPS).
It manages AAUM of ₹9.87 trillion (FY24) in the alternatives and WM segment, up 3.2 times from ₹311 billion in FY21. The number of funds served grew 5.4 times to 472.
Its NPS presence is nascent but growing faster than the industry. Both these segments are currently small but have significant growth potential. Over time, management expects non-MF businesses to contribute 50% of revenue, up from 31% at present.
Strong financial growth despite market volatility
KFin’s financial growth has been spectacular, driven by record growth in mutual fund AUM. Revenue grew at a CAGR of 13% to ₹838 crore in FY24, while profit grew at a 28% CAGR to ₹246 crore.
The jump in profitability is driven by operating leverage, as its cost-to-income ratio declined from 65% in FY20 to 56% in FY24. This also led to an improvement in margins, which grew by 8.5% to 43.8% in FY24. Looking ahead, Motilal Oswal expects it to post a revenue and profit CAGR of 22% and 32% over FY24-27.
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Its 9MFY25 performance reveals a similar trend. Revenue grew 33% to ₹808 crore, driven by robust 37% growth in the mutual fund RTA business and 51% in the international segments. Meanwhile, profit rose 44% to ₹248 crore, with a margin of 44%.
Valuation slides, but it’s still costlier than CAMS
Its price-to-equity (P/E) multiple has declined 42% from a peak of 87x in January to the current 50x, as the broader correction dragged down its share price. The multiple is still 30% higher than that of market leader CAMS (38.5x).
Revenue growth was led by strong SIP inflows despite the current slowdown, while AUM saw mark-to-market losses. However, management said it expects revenue to decline by 4-5% if current market conditions persist, causing a sharp correction in the stock.
Nonetheless, its annuity-based revenue model, which is linked to AUM, ensures stable long-term visibility despite short-term fluctuations. While challenges remain, its market position and growth potential make it a stock to watch closely.
For more such analysis, read Profit Pulse.
Note: Throughout this article, we have relied on data from www.screener.in. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points, and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educational purposes only.
Madhvendra has been a passionate follower of the equity market for over seven years. He is a seasoned financial content writer. He loves reading and sharing his honest opinions about publicly listed Indian companies and macroeconomics.
Disclosure: The writer does not hold the stocks discussed in this article.
