Q1 24/25

Jul 29, 2024

Summary

Q1 FY25 revenue rose 31% YoY, EBITDA 42% and PAT 57%, with broad growth across funds, issuer services and international markets. Guidance calls for 20%-25% issuer growth and 40%-45% EBITDA margins, alongside selective international M&A.

Ladies and gentlemen, good day and welcome to KFin Technologies Limited Q1 FY 2025 earnings call hosted by IIFL Securities Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Devesh Agarwal from IIFL Securities. Thank you, and over to you, sir. Good morning, everyone, and welcome to the Q1 FY 2025 earnings call, KFin Technologies Limited. From the company we have Mr. Sreekanth Nadella, the MD & CEO; Mr. Vivek Mathur, the CFO; and Mr. Amit Murarka, the Head of Investor Relations. I would now hand over the call to Sreekanth for his opening remarks, which will be followed by a Q&A session. Over to you, Sreekanth. Very good morning, Devesh, and thank you so much for all the participants. I will kick start with very positive news in terms of the Q1 results of our organization. Many of you might have already seen the results that we have established, the highlights and the headlines largely corroborating our continuous focus and commitment to all our stakeholders, be it our clients, our employees, our regulator, to continue to deliver excellent value for rock and water. The headlines, of course, are year-on-year growth across the important metrics of revenue growing at about 31%, EBITDA 42%, and the PAT numbers growing at about 57%. These numbers also highlight a very important trend, which is typically the quarter 1 in our industry is usually marked with a significant amount of slowdown given the Q4 is usually a very high energy quarter, both in terms of the client wins, revenue booked, and the market buoyancy usually tends to slow down a bit in Q1. Apart from that, this quarter is a significant deviation from that trend where our revenues even sequentially have grown substantially. And of course, the margins are expected to take a dip given the inflation and a reset of the business that typically happens on such an organization of our size, 10,500 employees, one would expect a certain amount of slight hits. But of course, as we have already seen over the past decade, usually this Q4 will continue to perform significantly even at the margins level. If you see this quarter, we have delivered a 30.2% EBITDA margin. The Q2 of last year with Q1 of the previous year, it was 37%. So a healthy 500 basis point expansion in the operating margin in this quarter compared to previous quarters. This quarter also for us marks a very important quarter from the standpoint of market share expansion across the business units. Mutual funds, for example, we have seen our overall AUM market share at roughly 5 basis points compared to significant improvements as the expansion ratio of the overall AUM for the company in terms of the clients' performance. This would augur significantly well in the context of a series of NFOs that have been aligned with us across our clientele in the upcoming quarters. Yields which we had been maintained at a very steady rate as compared to all the previous years, continues our commitment in terms of delivering high-quality revenues in comparison to the assets under management for our clientele. We have won near about 280 clients in all the businesses. We are in larger business. Very proud of my team's execution capabilities in terms of having won what could be the largest IPO in India that of Hyundai. These earlier largest IPO, LIC of India, was also very large. KFin Technologies also series of other wins that follows including Pine Labs and others bringing in 670-80 clients speaks volumes in terms of the growth and traction that we have, especially in the large IPO market. We have a series of IPOs that are going to go public. Winning a mandate doesn't necessarily translate to an immediate revenue yet. But the mandate needs to be locked in before the actual launch of the IPO. We're expecting in the coming two quarters to three quarters a significant number of our mandates which we have already won would go public based on the DRHP filings that we have seen. Next, the alternatives we continue to see a massive amount of traction having increased our revenue year-on-year by nearly 60%. AUM has crossed INR 1 trillion, and that augurs really well in terms of our overall growth. A series of funds that we have already won with capital raising gone down to a certain extent gives a significant gap in terms of commitment towards the fund, for example, which augurs well in terms of the rest of the year's revenues to feed through even as a series of wins that we've had this year, positions are exceeding really well into the coming year as well. The business that most of us are also keen has been the international. We have seen significant green shoots in the international market. The mark-to-market gains the last few years has been well looked at as the Indian markets have significantly outperformed many of the Asian markets haven't. But over the last two quarters, we have seen a turnaround in the markets with major markets, especially in Malaysia and the Philippines, that typically we are present. With market gain coming through many of the wins that we've had, the transitions completing and going live. We had already gone live. The first contract that we had in Thailand in the month of April, the first phase, and the second phase will go live in this quarter. Very happy to inform a large contract sign-up that had happened, in addition to probably what could be the largest contract which we are sign up that we're expecting for next day or tomorrow, based on the draft delivery that had already been cleared. This had been largely the businesses, the key businesses, the National Pension System, a small yet what I think will be a very important business advance to come, especially in terms of margin profiling. The industry grew at 12%. We continued our support in this regard for a little over 2. We grew at 27% in the case of pensions and our commitment to deliver very high-quality tech solutions which aren't able to be delivered by any of the other technology or other intermediary companies, is helping us to win a significant amount of traction in the markets towards data-led digital solutions from the asset management industry. If there was no exception, we had won two such contracts and we are planning to expand that positioning significantly well. Many of our acquisitions have fostered stellar growth of the company. People at the technology side grown as well as the year-on-year revenue, even as a significant amount of gains are coming through our contract administration acquisition of Hexagram. The M&A strategy continues to be a very pleasing one. We are currently looking to add one or two acquisitions in the coming quarter based on the progress in the stage which we have positioned in terms of structuring those deals. We are obviously extremely bullish and I know if this continues, mutual fund expansion in the country, as we have all seen in just a matter of seven to eight months, mutual fund industry had grown from $500 billion to $600 billion AUMs, and had just huge volumes in terms of the resilience the market has. The first quarter looks extremely strong. We are continuing to have a good market share in each and every one of these segments, whether it's the overall AUM, the NFOs, the folio creations, so on and so forth. A few one of this year especially have been solid as compared to the previous like quarters in the industry during the course of the industry. The Demat account expansion too had been pretty solid at about 30%. All of these have resulted in our issuer solutions revenue growth potentially in the previous year, as is the case with this current year as well. Typically, as I said, Q1 is a little heavier because 20% plus revenue from even an issuer solutions, which points to a much better as many of the corporate actions on the corporate dividends, paybacks, which you must have seen on many of these transactions will come through in this quarter onwards. In terms of the expansion, just a little bit into this national, we did sign roughly about 25 contracts in the Asian market. With the issuer solutions on the RTA space at about 25% and the accounting and administration solutions at about 20%. We have added a sizable number of clients, 12 clients in the past 12 months, and believe that as of current, more client acquisition would happen in future as well. Because even as two large wins are about very much almost utilized in the last four weeks alone. The overall AUM expansion and the transaction volume is low. We all know that the international markets offer a significantly higher AUM per transaction, which also always well in terms of the operating margin leverage that we take. The quantum of effort required to deliver to the same transactions is far lower as compared to what it is here in the Indian market. With that, I would hand over quickly to cover the financial performance to our CFO, and we will take questions. Thank you, Sreekanth. You have got a flavor of how the business performance has been in the last quarter versus last year. I will cover the financial performance. The revenue from operations went up year-on-year by 31%. We clearly had the domestic mutual fund growth was a little more than 34% year-on-year and 8% quarter-on-quarter sequentially. Even the VAS revenue has seen a growth. It is now about 7.5% of the total revenue. There is a substantial jump in terms of the overall VAS revenue by almost 15% year-on-year in this quarter versus last year's same period. On the non-domestic mutual fund business, the international other investor solutions has seen a robust growth in terms of revenue by 56.8% year-on-year and about 11% sequentially quarter-on-quarter. It is growth driven by the South East Asia business growth led by increase in AUM and new client materialization of revenue and AIF and PWM PMS segment, which is growing at almost 65%, 66% year-on-year. The Hexagram acquisition that we did has really contributed in terms of sale of platform and implementation of the platform along with the services that we offer, 80% growth year-on-year and almost 54% growth sequentially in terms of revenue. Issuer solutions has seen a growth of 21.7% year-on-year. For the reasons Sreekanth explained, we have won number of IPOs and migration of clients from other RTAs to KFin Technologies. Because of the seasonality impact of profit additions and dividends and bonus, coming quarters will see growth quarter-on-quarter, while this quarter sequentially on Q4 may not look good. That is the seasonality in our business. That is why we look at year-on-year performance. In terms of other businesses like global business, number of seats vary based on how the market behaves. So there may be slight up and down, but that is more a stable business than anything else. Overall, a robust growth in terms of overall revenue. If you look at our EBITDA margins, you will see a growth of 41.5% year-on-year. That is again led by operational efficiency and increase in revenue. While our expenses have also grown by about 21.7% year-on-year, that is more because of the normal increment that you give at the beginning of the year and the increase in IT expenses because of movement towards cloud. We see the overall expenses going up in the first quarter. The realization of that corresponding revenue will happen in the subsequent quarters. Overall, PAT is a healthy growth of almost 57% year on year. If you look at EBITDA margins and PAT margins, EBITDA margin has gone up by 315 basis points year on year from 38.8% last year, same quarter to 42% this year. PAT margins that was 23.9% in Q1 FY 2024 has grown by 476 basis points to 58.7% in Q1 FY 2025. We are now having strong cash and cash equivalent of almost INR 450 crores, which will be utilized towards the M&A that we are working on. You will get to hear more as we come near to conclusion in terms of zeroing in the targets to foray into international market beyond Southeast Asia. That is something which we are working on. Diluted EPS has grown by 57% year on year from INR 2.51 to INR 3.94. That's a reflection of the overall increased margin and the availability of the operational efficiency that we have been working on. That's high-level financial performance. We are happy to take questions now. Thank you very much. We will now begin the question and answer session. Everyone who wishes to ask a question may press star and one on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Gigi S. from Kotak Securities. Please go ahead. Hi, good morning, everyone. First question is on the M&A front. Scope, I mean, a bit more details as it kind of closes, but what scope are you looking to achieve, both from a capability point of view and then also from a financial impact of the acquisition in the near term, let's say, in this year something. Hi, good morning. This is Srikar. Let me take that. As we've been touched upon earlier on, we look at our M&A strategy through the lens of one of the three categories. One is a new geography expansion or roping. One is adding a brand new business line which we haven't been historically in, for example, Hexagram is one such acquisition. The third one is consolidation in the industry. Probably a good example is our acquisition of Sunita Software by Satya late. In terms of priority, we are looking at international expansion followed by new capabilities, followed by consolidation as our priorities in terms of M&A. The current M&A is currently under consideration and in focus and especially now largely on the international side. It is not a new capability, maybe so much as opening of a new geography business, maybe a risk-averse market where Incompent has a sizable presence. Of course, some of these acquisitions are standalone and tend to take time with the series of regulatory approvals that are required as well. Given the current phase at which we are in discussions, we believe it's probably about a quarter to 5 months away. This acquisition, it will have our acquisition decisions have always been margin accretive and/or open to the addressable market. This will fall under the same category. We do not throw top dollars on a company just for the sake of acquisition. Again, unless the target acquisition adds value for our shareholders, we do not go ahead. To that extent, from a financial standpoint, we believe it would be accretive to all the shareholders, and the value expansion from a top-line stand could achieve anywhere between 10%-15% over our current business in terms of annual top-line numbers and so on. Sure. Srikar, just one follow-up here. If you're looking for an international acquisition rather than a capability building one like Hexagram, the impact creation or value creation would you assume largely be driven by, let's say, cost takeout or improving the operational efficiency of the business more than the revenue growth that you can add to the existing business? It is going to be both. Let me tell you why it is both. Whatever you expect is anyway going to happen given the consolidation of the sector. Even from a value standpoint, there are very few administrators like us who tend to perform the end-to-end operation solution for any fund manager. There are financial agent players, there are financial accounting administration players, there are pure tech solution platform players. We are one of few who have managed to deliver outcomes in all of these three. The target acquisitions we too are looking at are not necessarily ones who are currently like us, there aren't very many. For example, the target acquisition we are looking at is largely on the financial agency from a value standpoint. The Hexagram acquisition and the pure financial accounting solutions and the services capability we built over the last three to four years will see a significant opportunity for cross-sell and up-sell through the clients. The addition of revenue aside, all of the clients will give us a significant opportunity to cross-sell services, including the value add and the tech play for those clients. Got it. Thank you. Thank you. Ladies and gentlemen, before we take the next question, we would like to remind participants that you may press star then one to ask a question. The next question is from the line of Supratim Datta from Ambit. Please go ahead. Thanks for the opportunity. My first question is on the retail comm business. I saw on the slide, I think you have mentioned that I think there is one big contract somewhere last FY 2024 and there are two in pipelines as kind of strategic assets. Some of them are coming next July. I just wanted to understand when would we see the revenues hit P&L and what kind of size contract we could see. If you could give us some color on that is the first thing. On the second one, the international business, you acquired Hexagram and WebileApps. I just wanted to understand that when it comes to the size of this acquisition, what kind of size are you comfortable with when it comes to acquisition, and who is— would you look at it only financially through your own balance sheet or would you get other forms of financing as well when it comes to acquisition? Those are the two questions that I have, and I am more than happy to take more. Certainly. Thanks for the question. The tech contracts that we are speaking about, the revenue when it will come in. For two of the three contracts, the milestones have already started. All of these contracts are milestone-based. Some at the beginning time, some at the development, some at the testing, so on and so forth. Two of those contracts have already started and revenue will start kicking in this quarter. The third contract too is going to start into the coming quarter. Net net, in this quarter too, all of these three contracts, certain amounts of revenue will come based on the number of milestones being reached. All of these contracts carry annual maintenance and change contracts revenue as well, which means that it becomes recurring in nature once it releases in the month from hereon. In terms of the M&A, broadly to again explain the size of the contracts. The size of the contract is again a factor of course, the opportunity presents to us. If you saw the size, they haven't been big M&A in terms of significant amount of investment. I think even on the largest M&A we have done was roughly about INR 80 crore-INR 90 crore broadly. But in international, as you look, we need to have to expand our watches a little bit more. Whilst there are opportunities and cases globally, not just here in India as well. Our sweet spot is anywhere around $52 million-$75 million and of course, smaller as well. Out of the $52 million-$75 million, as you can imagine, that easily could be financed with our own internal accruals. As Mr. Vivek had already explained yesterday, we have broadly been running very successfully on accruals, which will take care of the size of acquisition we are looking at. By the time the acquisition would start, conclude, we would have generated that much more cash to not need to leverage. Should we ever need to, we can. We are a debt-free company at this point in time if an opportunity presents itself. We need to not struggle to balance on the leverage even to increase the shareholder valuation, we would be able to do that. Just in terms of the target acquisition that we are looking at in terms of retention, revenue, it is anyways 10% to 10% of our target revenue for the end of this year. Got it. Just one last thing here. Just one follow-up question. In terms of the breakdown of the international business, what has been the growth in international versus AIF versus GBS? If you could give us a breakdown on that would be helpful. Yeah, I will take that, Supratim. So on the GBS side, if you look at Q1 FY 2025, as of now it is about 3% of the overall revenue, 3.5% of the overall revenue. Pension is about 1% of the revenue. AIF, PMS, PWM is about 4% of the revenue. Hexagram and WebileApps is around 3% of the revenue. So that is the composition. It has moved up overall in terms of international revenue solutions from an overall 10.5% of the total revenue last year to about 11.5% this year. So this is the high-level breakup. Got it. Thank you. Thank you. The next question is from the line of Pranuj Shah from J.P. Morgan. Please go ahead. Hi. It is Pranuj Shah. I had a question on your issuer solutions piece. Over the quarter, revenue growth of 20% has been strong. What could we expect if Kotak Mahindra and Bajaj Housing Finance do create the IPO this year? I think investors have guided for a mid-single growth in issuer solutions revenue on a steady state. Would these IPO proceeds be excellent on top of the revenue growth profile this year? Yes. The answer would be yes. I think from a mid-teen of the investor services, we are looking to mid-20s, you know, mid-20s to mid-20s growth profile this year. Not just the new IPOs, which of course give us a little bit of fever in that year's revenue. As you all know, these are all annually contracts. Obviously the 2020 years in particular gave us even more revenue than it gave this year. Revenue has gained some part year revenue that we get next year. Not just those, but there are at least about 8 plus IPOs that are about to go live in the coming quarter based on the DRHP filings that we have seen and the mandates that we have. Not necessarily of this year and next year as well. The merger of ICICI and all of them will provide immediate revenue source. Even more heartening for us is obviously the continued expansion of Demat and the retail portfolios. As we all know, the revenue component of public registries is initially tied to a number of our retail portfolios. The IPOs will definitely be, I suppose, take over the expansion of the Demat. If you can just context, you said mid-20s revenue growth excluding these IPO revenues, right? No, not excluding. All of this together. Okay. Understood. So 20%-25%, including the IPO revenues. In that context, do you still maintain that absolute 40% EBITDA margin? I know that in this quarter that has come off. Vivek mentioned that was due to increments and some systems transferred. So how do you see this trajectory for rest of the year and possibly also for FY 2026? See, I think that again, this is if I may, about Q1. This quarter at near about 40%-42% EBITDA margin is probably the highest Q1 that we have ever had. Right? Yes. If you saw last year it was 37%. So yeah, it is usually sub-40, this Q1. Because what happens in Q1 is typically your businesses of largely, let us say, the direct mutual funds, for example, the AUM as of March 31 and April 1 is going to be practically the same. There will be a little bit of modest gain, but you see that suddenly your entire wage, and the other tech contracts, which too are also tagged to the fiscal year, they tend to go up, right? So let us say the and then hence the usual increment. Also Q4 also is a big quarter for issuer solutions in terms of the corporate actions. Some of the critical one-time revenues that tend to stick up are anything tech and delivery revenues, of course. Many of those usually will not be there in Q1. In that context, a 42% EBITDA margin in Q1 is basically should give us a significant insight in terms of where the rest of the quarter would be. Somewhere last year at 37% start in Q1, we ended the year with near about 44%. We expect to see significantly better. Yes, of course, as we have always been mentioning, we are not necessarily chasing 100, 150 basis points of margin as much as the growth. The growth will continue to come in a differentiated manner as we continue to reinvest in technology transformation, new geography expansion, new asset class expansion, and so forth. Broadly, yes, we do expect the revenue profile to be higher compared to that was in the previous year. Also on the EBITDA margins, I think you would expect higher than what you also acquired FY 2024? Yes. Got it. Thank you. This is Vivek. I just want to reiterate our guidance on EBITDA margins. It remains in the range of 40%-45% as of now because we have to see sustainability of enhanced margin. Market is doing well. We are expanding in global market. But as I had mentioned earlier, and we have reiterated, that moving out of the 45%-50% range from the current range of 40%-45% will, in terms of sustainability, we will have to see a period of time of at least couple of years before we start moving our guidance beyond 45%. Perfect. Thank you. Thank you. A reminder to the participants that you may press star and one to ask a question. The next question is from the line of Sai Adithya Menon from Avendus. Please go ahead. Hi, good morning. Thank you, Vivek. Two quick questions. The first one would be that your EPS compressed from INR 3.72 to INR 3.66 over the last quarter. You had mentioned that there are some contracts given that were negotiated at the beginning of the year. Any more color that you can provide on this? My second question is on the international business segment. Any update on the overall $20 million revenue and has the Siemens critically gone live and has it started bringing in the revenue? Third question would be around ESOP trust. ESOP trust this year, FY 2024 was INR 3.6 crores and in Q1 it was INR 3.1 crores. Are you normal? I can give another question. Sure. Let me take that. The first question in terms of the yield compression is marginal, especially in the context of negotiation that had already been concluded. Clearly our top-line growth is faster, taking into account the contract that has been renegotiated. Almost all our large contracts have been renegotiated as of first day of this year. We are not anticipating it to be very separate. Of course, what will come through in the form of any gift changes in the form of telescopic effect, right? That obviously means that AUMs are growing substantially faster and significantly than the management fee. That could be a significantly better news in terms of much higher revenue profile as AUMs kind of go belly on threshold at this moment. In terms of the international, $20 million was top line, and it continues to be steady and growing. I called out about one large contract that had been signed and another one we are anticipating to receive any time today or tomorrow, even though a draft letter of award had already been issued to us by OCDE. These two are decent-sized contracts. They are materialistic contracts in the context of the Global Business Services, roughly anywhere between $1.72 million of revenue in the near term, followed by little about three-quarters of a million dollar revenue come through on an annual basis, excluding any change which was driven revenue that we will get over. These are the deals that have pretty much been deal-lined, and the remaining news is down the rest of them as the market conditions have significantly improved in the Asian markets this year as compared to the previous year, including the appetite of many of these conglomerates willing and wanting to outsource to administrators such as us. We had, in the month of May, conducted a conclave, including inviting the regulator in Malaysia, was received extremely well by the local industry, has also opened a series of doors for us as term culmination of the contracts that I am talking about. We intend to conduct similar such sessions in multiple other geographies later during the year, which we are hoping will also deliver similar such results. on the ESOP piece, I would let Vivek cover. Broadly, in line with our strategy to have top talent retention and a very customer-focused, we continue to outperform in every aspect of it. Wealth creation for our employees is as critical as it is for our shareholders. We have given a number of stocks to frequently performing employees. Of course, a year one it would be higher and it would taper down over the years. That is the philosophy in terms of long-term wealth creation for our employees who deserve it. Vivek. Thanks, Srikanth. Just back to what Srikanth mentioned, the current ESOP pool is exhausted with this last grant. There is a new ESOP plan for which we will approach the shareholders for approval and then the exchanges before we create a new ESOP pool. This is that whatever you are seeing is obviously in the first year when you hit for the new ESOP grant, it is higher. But forward with the new ESOP pool which is getting created, it may slightly go up in terms of about the current year, you can assume about 15, 16 crores of clear hit. Next year onwards, it may be slightly higher because there will be new ESOP pool, there will be new ESOP grants to new talent that we are acquiring in the international territory as we do acquisition and we employ more people to attract and retain talent. So it may be marginally more next year. This year it will be around INR 15 crore-INR 16 crore. Thank you. Sorry if I could please just one more question. On the issuer solutions part, folios per company was higher just in this quarter. Previously that in the first few years went down. How do you see it for the entire year? Have you been achieved partially or is it still on track? I am sorry, I did not get the. Between what has reduced? I am sorry. Revenue per folio. Yeah. Revenue per folio has slightly come down and but numbers folios per company has increased. Just wanted to understand that. Yeah. So again, if you extrapolate the logic, it would be slightly a function that of even asset management businesses. When you have certain clients and certain corporates in the case of issuer solutions, the retail folios expand dramatically for some of the clients where let's say the unit pricing is slightly lower. There is a marked difference between asset management and corporate services, right? In the case of the AMCs, the yield numbers are pretty tight band range, pretty narrow range, right? Depending upon which clients are, and pretty much almost all the clients. Whereas in the case of issuer solutions, the unit price can be quite significantly varying. For some clients, it could be as little as INR 67, it can go all the way up to INR 40 as well. It is literally a factor of which of the corporates that of all the literally 200 clients we have has had a significant retail expansion. If some of them happen to be the ones where unit pricing is slightly lower, it tends to obviously have an impact on the overall temp. That is just an aberration which corrects itself rather quickly because there is no one company where it will continue to have a significant market value share compared to others. It can be a sectoral movement, it can be thematic, it can be technical, it can be anything at all, country performance, so on and so forth. I think what is important is definitely the folio count expansion. The other advantage we have in the case of issuer solutions again is the prices tend to go up with the steep pricing that we have. Every year we follow that. Certain number of clients will actually move ramp from point A to maybe 1.08 or 1.10. Typically 10% of unit price expansion also happens in this line of business which we expect to see happening in the coming quarter. This is Vivek. I just to add to what Sreekanth mentioned, if you look at our Q1 FY 2024 average folio fee was 7.3. That has gone up to 7.5 now in Q1 FY 2025. If you are comparing it with annual 9.4 average coming down to 7.5, that may not be the right comparison because at the end of the year it will hover between 9-10 rupees only. There are various components in the corporate issuer solutions besides the folio income, like cover protection, value-added services, which increase the average folio fee as you go along future cycles because most of the companies declare dividend or bonus or rights or AGM-related revenue in Q2 and 3. You will see an uptake in the average fee over the quarter but it won't come down from 9-10 rupees on an average annualized basis. Thank you. Understood. Just a rough one. Any communication, some further selling of the stake from your shareholders' side or any chance as such? No, no such communication has been received. This year there has been a small paring down and our shareholders' commitment and their business continues to be as it was in the past many years. Yeah. Having said that, General Atlantic is actually a key and they have evergreen funds. It does not mean that they will not give returns to their investors, so it's their choice. I don't think it impacts us in any way as a company. It's a company which is professionally run by a professional board and professional management. I don't think there should be a concern in terms of GA choosing to dilute further. Very helpful. Thank you so much. Thank you. The next question is on the line of Uday Pai from Investec. Please go ahead. Thank you for taking my queries. Two questions from my side. First is, how is your EBITDA margin in the international segment for this quarter? Secondly, in your opening comments you mentioned that phase 2 of the Thailand contract is expected to go live in this quarter. Any color on the incremental revenue that could come from that contract? Those are the two questions. Sure. Vivek, you want to take that? Yeah, I will take that. International business continues to be hovering around 30%-35% of EBITDA margins. As Srikanth mentioned, as the new deals which are large deals get booked, this will improve further. While our average based on the AUM continues to be higher than what we get in India, we will continue to get EBITDA levels surpassing what we have in India as we become larger in terms of scale. So 5.2 bps versus what you see, 3.6 bps in India. Color on the incremental revenue from phase 2 of the Thailand contract. Yeah, I can take that. Phase 2 was expected to go live late September through the UAT and the clearance from the management house. It was roughly a INR 12 crore contract and about a third of that has been booked into the phase 1. The rest of it goes to booked in fourth subscript which goes go live. There is a small component of that that is reserved into the subsequent year in terms of phase 2, part 1 B. Okay, thank you. Thank you. Next question is from the line of Sandeep Ghosh from Citigroup. Please go ahead. Good morning, sir. Just two questions from my side. First, on your domestic alternates business. When I look at your revenue yields, whether I look at it on a corporate basis or on an AUM linked basis, we have seen increases in the past quarters. Just wanted to get some sense of reasoning behind it and how should one interpret it going ahead? Is it more of a new and acquisition-led sort of revenue up-tick or is it more structural in nature? Second, on your international business while you are doing well in your Malaysian business. In some of the other Asian markets, I mean, the number of clients have broadly remained stable at flat in the business through the last almost 12, 18 months now, barring one or two wins here and there. I just wanted to get some input from non-Malaysian geographic targets or camps. You mentioned you will be organizing some events in those markets. I just wanted to get an idea about the traction that you expect in those markets next year also. I think for the domestic, RTA is actually a structural growth. There is not any much time it is multiple item that is changing anything. I think it is the quality of the clients that we have and the business advantage that we have in this case, of course, is the presence of certain clients who are growing faster than the industry. I mean, it is not a concentrated growth of few Asset Management Companies. This is what helps us to keep our yield higher. This is what keeps us certain amount of churn throughout fund houses to also hit performance every once in a while. I mean, there is no one scheme or one AMC that can continue to deliver superior returns across industries over a long period of time. When that churn happens, more often than not, we can see such industry or dynamics was reflecting in our overall growth in structural nature. For example, if you see the Q1, the overall AUM market share of AMC clients is about 41% previous year. That is a big gap in terms of delivery on a case response over the market. In terms of international, two large clients that we have signed up this year, both are in Malaysia, as you said and both are pretty much in the last four to five weeks. Philippines offers a very interesting proposition for us. You are right in your observation that we have only added one large client that was last year in Philippines. That said, the market in Philippines is relatively smaller as compared to Malaysia for that matter. Hence, rightfully so, our efforts are concentrated in geographies where there is higher opportunity. Thailand offers difficult and that is where we could break into it, with one of the top three asset management companies in Thailand. The positions are well for several reasons. As I mentioned earlier, too, the international contracts, the title time in terms of natures is a little bit different. Given these are not necessarily driven through RFPs so on and so forth. These are deals we are orchestrating. We are pressing upon the outcomes we can deliver. There is a latent inertia, and I would always equate this to pretty much where Indian IT outsourcing was maybe two decades back, where you have to convince the client the virtues of outsourcing, and just as importantly how offshoring would help. Neither of these two are very easy conversations to be had. Once you gain the momentum, as we have done in case of Malaysia, and as you can see the sequential number of client wins that we have been having, the same will be replicated across those geographies. That covers Singapore and Hong Kong where we had clients. But then as in your observation, we have not had too many clients. Last year we had one mutual fund. Mutuals, we have one in Singapore. We have also recently signed up with Manulife in Singapore in addition to the client we already had. But it needs to be understood that Singapore and Hong Kong are predominantly alternatives markets. They are mutual fund markets predominantly alternatives. We had to have a solution which would be rivaling that of the current incumbents in the case of alternatives. The acquisition of Hexagram and hence inheriting mPower, combined with the Exol platform we created and launched in the month of March, I would call this out in our annual investor conference. Basically now has given us the ability to deliver alternatives which is far more bespoke in nature and non-linear as compared to mutual funds. Hence, the momentum I am talking about, the one we are doing in Malaysia in the month of May, we are replicating something similar in Singapore and Hong Kong in the coming quarters. Would it attract a sizable number of fund managers, especially the PEs and the hedge funds and the VCs? They are going to be my target clients. This is less of mutual funds at this point in time. So you would start seeing traction there. If you saw Indian alternatives plus, we have moved from about 100 about four years back to today managing about 500 products. Having a market share of 37%. That happened because we created a platform and its series like it raises EAFE. Similarly, it had to be done for Singapore and Hong Kong, which is what was completed as of the month of February, March, when we launched. You would hear a lot more on these two geographies in the coming months. Just a quick follow-up. You have been doing an inorganic acquisition in Malaysia at the same time and then cleaning up the business versus organically building the platform or kind of leveraging on the platform in some of the geographies and then kind of trying to target clients in a new geography like you said, for Singapore and Hong Kong. Is there an inherent difference in the product strategy between the two? Second, on that front, the acquisition that you are talking about on the international front is just linked to the similar product purpose. Yes. One could easily argue that what we have done in Malaysia is what we ought to be replicating elsewhere. Believe me, that is what we intend to do as well. That said, we cannot be all hoping and praying that an acquisition would happen in every target country. Not every time it is possible. Not every place you have a like to like target acquisition that we can look at, and not everybody is looking to be acquired either. So we are looking to buy versus build kind of a strategy as always. In international, we have to continue to build our organic way to expand whilst continuing to look at an acquisition. So short answer to your question is acquisitions we are looking at are in the geographies where our presence needs to be expanded, especially in the ones that I just spoke of. Whilst that happens, we are not going to stop or obviously not will keep waiting for the acquisition to happen. We will build our capabilities simultaneously as well. What happens is that there is a convergence even in the case of Malaysia's future intellect. While we have done the acquisition, we have still taken our India's platform and repurposed it for a few problems. Scaled up our solution because that is the right way to expand into international markets rather than just taking a collage of taking acquisitions. Over a period of time, that would significantly impact the operating leverage and the technology leverage that you have. So short answer, we continue to look at acquisitions in those three geographies as much as we are continuing to build out our platform. But we have to do it either before or after this transaction. Got it, sir. Thank you, Anup. Thank you. Thank you. The next question is from the line of Sanil from ICICI Securities. Please go ahead. Hello. Good morning. Good afternoon, sir. Thank you for the opportunity. My question is regarding the new asset class which SEBI has just said. I know it's very early days, but do you see a significant opportunity from an RTA side or a backend side of it? Do you think that since you have such a tech capability on the AIF side, do you think this can grow into a very good opportunity? As well as do you think that since it's a different product or asset class, do you think a new contract would be needed on this asset class? Great question, and the short answer to all of those is yes. Every new asset class provides itself an opportunity for us to grow and expand. Obviously, it is still very early days in terms of the very confident that it would emerge. Obviously, the regulatory is keeping in mind the gap that exists between the mutual funds PMS and the AIFs in terms of thresholds are quite large. Keeping in mind the income variation at least at that level, even has significance. From that standpoint, new asset class, believe could provide a very interesting via medio opportunity for several more people to invest and slightly take a slightly higher risk profile as compared to an FPO, much lesser risk profile compared to PMS and alternatives. Yes, of course, we will have to create the solutions that keep it such an asset class. We know all of these financial asset classes necessarily need to go through a build-up of chain and case for registrar and transfer agent. We are one of those. Even we are shared with both the issuers, be it the securities and the bond markets, as well as in the mutual fund alternatives PMS. In one way or the other we will have a role to play in that. I cannot not mention there is a renewed focus, especially in the form of course, the government of India and the regulatory drive REITs and infrastructure as well. We are currently working with the regulatory to create a solution for REITs, which obviously will have an an opportunity coming forward. Thank you, sir. Thank you for the response. Thank you. The next question is from the line of Abhijit from Kotak Securities. Please go ahead. Yeah. Abhijit. Thanks for the follow-up. On the domestic alternatives discussion, that is a very fast-growing business for the entire industry. In terms of pricing, I think we are broadly at about 3 to 4 basis points. My question really is, one is that do you think this as a market will settle in terms of pricing in the actual pricing levels? And second is that in terms of competition, like we recently saw SS&C also setting up an India front office in GIFT City. Do you think over a period of time that can come under pressure because of the existing medium risk level? Thank you. Thanks, Abhijit. To the first question 3 to 4 basis points is pretty reasonable number for Indian alternatives in the context of GIFT City. I would be very happy if it settles anywhere near 4 at the higher end of the spectrum. Internationally, of course, the numbers are much, much higher. It range anywhere between 7 or 8 all the way going up to 3 also in many cases, depending upon the size of the fund and the domestic assets you are talking about. So that is that. And given we are the only RTA who does both GIA and FAA at scale our revenue is not just per fund level, but also it is both the credibility and security product. Otherwise, broadly speaking, the figures, it will be lesser than 3 to 4 basis points you are talking about. And many international fund administrators setting up base in GIFT City is natural. It is not just that you have IQ-EQ, you have partners and literally few others as well. So they have all been in India for the last number of years, largely to take care of the trustee they have set up in India to service their international operations. Some of their current clients internationally are also obviously exploring GIFT City as a possible infrastructure as their set up. These clients obviously would not want some administrator to be able to bill them as they expand into GIFT City operations. That said, if you see the total contract wins in GIFT City, we have nearly 30% of all the GIFT City funds managed by us. GIFT City also signed the first annual statement insurance policy which is listed in the GIFT City. Now, when it comes to pure domestic alternatives that will be supported by any of these fund administrators, we do not want to go out and think that others will not join the party absolutely. But our advantage lies in a certain amount of localization of the platform and a cost profile which will be very, very hard for competitors to match and beat. To that extent, whilst we continue to obviously keep a watch on the overall expansion of the service provider ecosystem, we believe that we have significant number of modes and the modes that are working today. And hence we are more confident to grow faster in the coming years as against our wise in the context of the competition. Thank you. The next question is from the line of Amit Ajita from Edgeworth. Please go ahead. Good morning. Am I audible? Yes. Yeah. Thank you for the opportunity, and I congratulate the KFin Management for commendable performance in the past one and a half years from the IPO date till now. The value has doubled almost, and I appreciate this. My question was regarding the reduction in the promoter holdings. My question was regarding the reduction in promoter holdings. Sir, I think Mr. Vivek had already answered that, and I can add a little bit more color. Our promoter is a private equity. A private equity's fundamental job is to deliver returns to their shareholders and their investors. In that context, anyone who has invested a substantial chunk through down cycles over the period of time. But the company is professionally led board, professionally led management. It's been nearly seven years since General Atlantic has been there, and they've been an exceedingly wonderful partners for us and will continue to be here for at least the foreseeable future, even as one may expect the blocks to be sold over the next bunch of years. Understood. Thank you. Thank you. Ladies and gentlemen, that was the last question for the day. I now hand the conference over to Mr. Devesh Agarwal for closing comments. On behalf of IIFL Securities, I thank the KFin Management for giving us an opportunity to host the call. Would the management like to add any closing remarks? Nothing at my end. We continue to focus on what we do best, which is to deliver value to everybody in the stakeholder ecosystem. Thinking in the context of the new finance trends, optimism we are seeing across our current clients and the prospects, we hope to deliver higher value as compared to what we have over the past bunch of years. Thank you so much for joining. Shrin, thank you everyone for joining the call today. You may now disconnect the call. Thank you. Thank you. On behalf of IIFL Securities Limited, this concludes this conference. Thank you for joining us, and you may now disconnect your lines.