Ladies and gentlemen, good day and welcome to KFin Tech Q2 and H1 FY 2026 earnings conference call hosted by IIFL Capital Services Limited. As a reminder, all participant clients 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 touchtone telephone. Please note that this conference is being recorded. I now hand the conference over to Mr. Devesh Agarwal from IIFL Capital Services Limited. Thank you and over to you, sir.
Thank you, Vikram. Good morning, everyone, and welcome to the Q2 FY 2026 earnings call of KFin Technologies Limited. Today, from the company, we have with us Sreekanth Nadella, MD and CEO, Vivek Mathur, CFO, and Amit Murarka, the CFO of International Business and Head of Investor Relations. I would now like to hand over the call to Sreekanth for his opening remarks, which will be followed by a Q&A session. Thank you and over to you, Sreekanth.
Thank you so very much, Devesh. Very good morning and a very warm welcome to the [NLL]. Happy Diwali and a wonderful festive season that has just gone by, and then hurrah for ourselves. As you know, the festival season typically always good news for most Indians. It has been no different for KFin Tech . We have completed Q2, looking at the fiscal quarter, marked by a fairly well-rounded performance across various aspects of our business: client acquisition, revenue generation, cost optimization through margin expansion, new client logos, expansion into new businesses, launch of new products, and acquisitions, so to speak. It's been a fairly busy quarter for us. We have seen, amidst fairly volatile markets, we have delivered results which we believe we are reasonably satisfied with. As always, there is always room for improvement, and that's what we continue to learn.
We continue to be the country's largest registrar and transfer agent by a mile in terms of number of clients, in terms of mutual funds, total number of the quantum of market share in issuer solutions, number of clients in alternate investment funds, fastest growing CRA national pension system, and the only registrar who is globally present. To augment and to add wings to our vision, which I continue to believe is for KFin Tech to be the first large global fund administrator coming out of India. We have completed the acquisition of Ascent Fund Services, headquartered in Singapore, into this month, and that marks a very important milestone for us.
As you have all seen, these have all been fairly focused and purposefully orchestrated buy versus build strategies that we've been adopting for a fair period of time, whether it is acquisition of Hexagram because we needed fund accounting capabilities, acquisition of Webile, largely for mobility capabilities, but leveraging in-house capabilities for what we believe is core to us, which is data. We built our own big data platforms, cloud capabilities, so on and so forth. Internationally, whilst we drive our organic growth in the form of public market funds, we believed that for the private market funds, it was always a better strategy to acquire an entity outside of India. That marks the closure of that first step towards the direction in terms of acquisition of fund services. Overall, you know, we have expanded our footprint in mutual funds in India as well.
We have signed up with Lakshya Mutual Fund. There have been some concerns that some of your experts, in terms of a little bit of tapering off of new client logos, you'd be happy to hear that we have won four out of four last mutual fund mandates that have launched in India, in addition to transitioning one. That, of course, will only be a medium to long-term revenue accreting topic, as I continue to believe that a new launch or a new mutual fund will only add revenue maybe three years from the day of signing up, three to four years, all depending upon how they perform. It is critically important that we stay focused in terms of helping our current clients to grow faster through technological innovation, through partners, producting and platforming, and so on and so forth.
We have launched Ignite, as you all know, into the previous quarter. It has found its way into every little corner of the country, every distributor, every partner. Just yesterday, we had a wonderful event in Bangalore with Moneyc ontrol, where we have again worked with a whole lot of distributors. We launched IRIS as a product and a platform, entirely creating a new ecosystem for partners, for financial intermediaries. Think of it like an urban club for various skilled workers. This is going to be a seamless platform for financial intermediaries who would be able to enhance their livelihood by way of selling multiple asset classes. It will also help every single citizen of India, as you now have a single individual who can solve for nearly every financial need one person may have, whether it is fixed deposits, mutual funds, pensions, loans, credit cards, what have you. Right?
That's mutual funds in terms of, in addition to new client logo additions, we continue to outpace industry in terms of the AUM. We are marginally being better off than the overall industry. Of course, one area that we are watchful about is on the equity growth. Needless to say, I think some of the larger asset management companies serviced by our friends in Chennai have been growing much faster on the equity. Given they have a much larger base, it's understandable. That said, what I take heart in is the fact that it's a circular growth at R&D in terms of every AMC growing much, much faster. That's resulted, as you could see, in the overall yield actually getting better in comparison to Q1. I guess that's the difference between en masse all agencies going together versus pretty much going at any one point in time.
I would say the book continues to hold well, closing to 40%. I continue to believe any long-term projections should be tailored to where the SIP is today. If we are 40%, there is no doubt in my mind there will come a time in the history of KFin Tech where we will reach the overall market share to close to that number, as SIP will be the determining factor in terms of the overall AUM over a long period of time. Issuer solutions, we have added nearly 500 clients. Every quarter, we are adding that kind of a number. We're extremely focused now, not just in member IPOs, but also in SME IPOs, unlisted companies, etc. We are building this for medium to long term, even though near term, this may not be massively revenue generating for all the SMEs and unlisted.
We are looking at a medium to long-term horizon, and I believe that will add a significant amount more to our organization, something that also is slightly away from the mark-to-market revenues that our industry deals with. We have launched the country's largest IPO, LG, successfully. Every week, we have at least three odd IPOs happening from now till the end of December, which all goes well for this year, of course, but more importantly into the coming year. As we all know, these are all annuity revenue contracts. Also happy to confirm that we have transitioned a very large mandate in the form of BPCM, which is large in terms of the corporate registry business. We have several in the pipeline in terms of transitions. In the international and other solutions, we have added several new logos and several clients here to go live.
Overall, business continues to do well. Of course, the AUM growth is probably not as large as one would have expected, at least in relation to India. Given our contracts have minimum billing, subject to the NVH in the particular way you end, as the AMCs grow beyond the threshold is when we'll grow faster. At this point in time, our growth is nearly entirely hinged on new client addition, which is adding more revenue. We have several large international deals in the pipeline. Some of them, we were hoping to have concluded in the previous quarter. There is always a timing difference with large teams, with the testing season, so on and so forth. Into this coming quarter, we are looking at some large deals to be signed. Central record keeping agency, national pension system is a very, very interesting piece of work.
Again, on a medium to long-term basis, I believe it's a very important line of business in terms of the margin that it can contribute, as well as the revenue it can grow. There have been, for a change, tailwinds in the form of regulatory changes for pensions, which will augment our revenue, where the regulator has permitted basis points-driven charging much like that of our mutual fund services as against a fixed fee per plan, which was the situation back in the day. We continue to grow at 3x the pace of the industry, and we have crossed a double-digit number. We are 10.3% in the overall industry, participating nearly entirely only on private markets. That clearly explains to you in terms of our market share in the private sector, is at least 4x that of the overall industry.
This is an area we will continue to invest our time, effort, and money as India will continue to become a large pensionable society. Now, AIF, we crossed INR 1.8 trillion. I think we will cross INR 2 trillion by the next time I speak easily. Again, a fledgling asset class and something that we have found our way from probably nearly nothing at all in terms of our overall book of business to manage close to 40% of the overall industry. We are confident we will get close to 50% into the next year and 18 months. In this city, our numbers are much higher. Of course, close to 60% combined with Ascent , that gets to about nearly 3/4 of all funds being managed by the combined entity of KFin and Ascent .
By that, we would like to keep that number and then probably even scaling it up as we progress in terms of our ability to serve multiple service, multiple other clients. Overall, the revenue numbers, you have seen nothing for me to elaborate. We believe, if not for certain M&A-driven costs and certain one-time costs, our margin performance would have been better than what you could see, which clearly augurs well in terms of how we believe that the core growth and its contribution in terms of the productivity-driven and it's very scientifically administered productivity-driven gains in terms of margin expansion is sustainable, notwithstanding the one-off expenditure that we have had into the previous quarter also.
We have continued to be invested in our tech solution, as I always believe that managing a business like this, which has a very strong dependency on how the markets perform and how our clients perform, both of which may not necessarily be entirely in our hands, we have to do and orchestrate things that are controllable in our own hands. Part of that was value-added solutions in the form of tech-driven revenue. We have continued to expand our big data solutions to the industry, both for our clients as well as for several of the listed too. We have won another one large data contract into the previous quarter, and we have several that we are talking about at this moment in time, hopefully we'll classify in real quick time. Overall, value-added solutions as a business continues to expand about 40% year-on-year.
We believe that it can grow faster than that into the coming years as well. We have signed some very interesting contracts in the international space, some with trustees, some [not with asset management] companies, which gives us a foray into incidental and ancillary industries, but nearly entirely depending in terms of fund servicing aspects of it [audio distortion] w ithin the details as to how that is fully. We continue to expand on the wealth as well. We have signed expansion of current platforms with some newer clients. Having successfully gone live with many a client and the platform has proven its merit and work. We have now customized it to fully be globally ready in terms of being multicurrency, multi-geography, and multi-asset. We are currently in talks with some of the clients in Singapore and in the Philippines.
Given it operates in a slightly non-regulated space and scope of expansion being far higher, I'm hoping that into the coming few quarters, we'll have more to talk about the wealth space. Probably one of the newer sectors that we've been in, but one of the things that I believe is probably the most promising in terms of the growth potential in addition to the international markets, so to speak. The overall AUMs, I think in a very tepid quarter, the net flows continue to be holding up. The SIP book continues to be resilient and strong. With markets turning the corner, which I think is probably happening around now, and with good earnings season, I'd like to believe that we have better days ahead in terms of certain mark-to-market gains in addition to net flows continuing to expand.
Hopefully, that log will be better in terms of the margins and top line as well. Given much of our alternate investments are also in CAC 3 model, our mark-to-market gains in AIF also will be advantageous to us. Clearly, all the CAC 3 funds are primarily public market invested, and hence, I'm expecting an AUM expansion and hence a revenue expansion based on that into the coming quarter as well. We have seen a slight degrowth in the number of folios in issuer solutions into the past quarter. In spite and despite of that, we have grown quarter-on-quarter sequentially and year-on-year, much higher than, I guess, in the previous year. That's largely a symptom of new client additions and transitions. With the markets turning the corner, I expect future investors to come back.
If that happens, it will have the dual advantage of annuity-driven growth because of several new logo additions and more IPOs coming every single week. We are going to be doing about two to three IPOs every single week from here till pretty much end of December. With the net new folio addition, that also should add well into the issuer solutions. A better earnings by the corporate India translates to better corporate actions, which hopefully will mean that into Q3 and Q4 we will be better positioned in terms of corporate action-driven revenue that will come in the issuer solutions business. That's broadly my key update. I think I'll just take a minute and then I'll turn it over to Vivek. It's been in works for a fair period of time.
Given their presence in above-aging geographies and moderated and regulated by about seven different regulators, it was a bit of a task. We were hoping to conclude it in the previous quarter, but that's all right. We've done it in two days, and hence, we'll be able to consolidate our books into the coming quarter. We have had a very, very engaging workshop with the acquisition in Malaysia. In the previous quarter, several of KFin and Ascent leaders together talked over strategy in terms of top line expansion, looking at areas in terms of cost optimization, whether it is a consolidation of real estate, consolidation of tech assets, consolidation of human assets, and so on and so forth, with a view for margin expansion and a more concerted delivery mechanism that together we could orchestrate.
We have a very well-defined plan in terms of how to make this 1 + 1 acquisition not two, but then double-digit acquisition in terms of leveraging the synergies that both re-entities have against each other. Into the coming quarters, obviously, the consolidation will happen, both the financials as well as the rest of the work. Very, very pleased with the quality of talent we have with the organization. There is a lot that my teams will learn on private mandate space. There's a lot that Ascent teams would learn in terms of our technology capabilities and how we can scale up globally now that we are present in about 18 + countries. We have a few more that we will be starting into the coming year, if not into the coming quarters.
Lastly, I think in the overall international space, large mandate transaction has been a topic of discussion once we have signed with Arin last year, which you all know is a reasonably large deal. We have three to four such deals in the making at this moment in time. In fact, we are taking pensions on the back of our national pension system platform, which is called [SUPLIMA], to parts of Philippines and into parts of Asia, where we have seen reasonable impetus in terms of the local governments pushing for very highly pensionable societies in that part of the world. Hopefully, in time, there will be some reviews that they will be able to announce it as well. That's broadly the key highlights. Just one last thing in terms of the FINETS as a program, which is our replatforming of our core business.
It's progressed quite swiftly into the previous quarter, and we have now launched, or rather have gone live with two out of the 16 modules of FINETS, which is what is going to provide us the confidence, which has given us confidence in terms of our capability to completely replatform our 40-year-old tech platform on which nearly 50% of regional investors and about close to [INR 30+ trillion of AUM] is being managed. It's not an easy task. We believe that from here on, it will accelerate. That should give us, hopefully, the next levers in terms of better client servicing, faster go-to-market strategies, significant growth for our clients in the form of our capabilities to deliver faster digital solutions, and hopefully some amount of productivity-driven margin expansion as well. That's for me. I'm going to turn it over to Vivek, and I'll come back for questions later. Thank you. Vivek?
Thank you, Sreekanth. Good morning, everyone. About the financial results for the half year ended September 2025. For Q2, we did INR 309 crore, which was 10.3% higher year-on-year for the same quarter, and sequentially 12.8% higher. For the half year, it was 12.6% higher as compared to last year half year. If you look at the breakdown of the revenue growth, on a year-on-year for the same quarter, the domestic mutual fund business grew by 10.2%. The international and other investor solutions grew by 7.1%. If we look at the core business, excluding the GBS business, the growth was 26.1%. Within that, the global fund solutions growth was 14%. The pension business grew by 21%. The AIF, PMS, PWM business grew by 28%. Hexagram grew by almost 54%. Webile grew by 18%. GBS de-grew by 70%.
If you look at half year, the growth in domestic mutual fund business revenue was 13.5%. If you look at international and other investor solutions, it was about 3.8%. If you exclude GBS, the growth was 27.5%, which is the growth in the core businesses. Within that, the global fund solutions business grew by 12.7%. The NPS business grew by 26%. The AIF business grew by 29%. Hexagram grew by 87%. Webile about 8%. GBS was negative by 77%. Issuer solutions business grew for the same quarter, this year versus last year by 13.4%. In terms of half year, it grew by 18%. Overall, the growth has been decent in terms of whether it is sequential growth or same quarter last year versus this year and half year. From the overall perspective, the sales pipeline is promising.
We hope that we will continue to gain traction in terms of growth in revenue in times to come. If you look at the EBITDA, EBITDA grew by 7.2% year-on-year for the same quarter. Sequentially, it grew by 19.2%. For the half year, it grew by 10.3%. The EBITDA margin at the end of Q2, for Q2, was 43.9%. For the half year, it was 42.8%. If we look at PAT margins, PAT margin continued to be 30.2%. There was a growth of 4.5% year-on-year for the same quarter. Sequentially, also, it grew by 20.8%. For the half year, it went up by 8.4%. For the half year, the PAT margin was 29.2%. There were some one-off expenses that Sreekanth mentioned. I think we are range-bound in terms of our guidance on EBITDA and PAT.
We are confident that we'll be able to maintain that guidance once even asset integration takes place in the next quarter. The diluted EPS went up to INR 5.38 and for half year to INR 9.83. Cash and cash equivalents at the end of September were INR 690.68 crore. We have paid a dividend of INR 129 crore post this quarter and also Ascent, INR 308 crore. As on date, we have cash and cash equivalents of INR 413 crore, which is still very healthy in terms of our ability to invest for future as well as to continue to maintain a healthy working capital. Happy to take questions now.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all the participants in the conference, kindly limit your questions to two per participant. Should you have a follow-up question, please rejoin the queue. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Karthik Chellappa from Indus Capital Advisors. Please go ahead.
Thank you very much for the opportunity. I have two questions. The first one is on issuer solutions. If we were to look at this quarter, we've seen a decent amount of margin compression in the issuer solution segment. While I note that the base quarter margins are probably elevated and not the right base, nevertheless, we have seen some compression. Could you just give us some color on what led to those margin compression and what is a sustainable level of margins going forward for the issuer solution segment? That's my first question.
Thank you, Karthik. There are two distinct reasons for that, and it is transitory and something that is not going to be repeated for a questionable period of time. One is, since there have been so many new IPOs that we have handled in the recent past, our labor costs are basically semi-linear, which means that up to a particular new client acquisition and addition, our current manpower is adequate to take on, right? Hence, there is no additional cost associated with that. Once the number crosses a particular threshold, there is as much that can be leveraged out of existing staff, and then we'll have to add certain numbers. All that certain numbers will then continue to give us a certain amount of semi-linearity for a fair period of time without having to add new clients just because we are handling new clients or new IPOs or new transitions.
There is a one-time slight reset of costs, which, spread across the newer mandates that we are winning, will mean that the cost per mandate will come down. Hence, the overall cost vis-à-vis the revenue that we're going to accrue will come down. Hence, the margins will come back to a better place. Two, we have been in the context of significant push by the regulators in terms of unclaimed amounts to be given back to the industry because in the securities market, we have several physical shares dating back to the 1970s and 1980s and 1990s and people who can't be traced to. That basically has resulted in several new claims that have come stating that, "Look, these shares belong to me," so on and so forth. Back in the day, they were probably worth a few hundred, but now they are worth several tens of crores of rupees.
Conscious of the risk that is associated with this in terms of frauds and what have you, we have incurred certain professional charges, which is probably a one-time activity and may continue coming up quarter or so in terms of vetting the transaction that we're clearing. Once that is done, we'll go back to normalcy. Those two have had a transitory margin impact on issuer solutions. Our ongoing margins, I'd like to believe, would be similar to what we've had in the past, with the exception of maybe two to three quarters.
Excellent. Thank you for the detailed explanation. My second question is on the mutual fund RTA business. You did allude to in your opening remarks that the yields have kind of stabilized or so. Can we take it that going forward, at least for the rest of the year, the yields should settle down at current levels, which means on a sequential basis, the AUM growth and the revenue growth in the segment should more or less start to mimic each other? Is that a fair inference that we can draw from your comments?
I would say yes, with the exception of minor movements, and that can be plus or minus, Karthik, because of the hypocrite pricing, right? I mean, if, for example, any one of the clients has moved into the next year and the additional incoming Kendari is going to be slightly lower, that may have a slightly negative bias. As I've always explained, yield is not just discount-driven. Yield is driven by which AMC is growing. Yield is driven by the asset mix. Yield is also driven by the pricing. It is not only pricing, and it is strongly possible that there can even be a positive uptake. For example, if all my mid-tier AMCs grow much faster than my larger AMCs, technically, we may even see a positive surprise.
It's going to be hard to predict, but I would believe that it would be stabilized around the current number plus or minus a very small standard deviation.
Excellent. Thank you very much, and wish the management team all the very best for the rest of the year. That's all from me.
Thank you so much, Karthik.
Thank you. The next question is from the line of Abhijit from Kotak Mahindra Asset Management. Please go ahead.
Hey, hi. Good morning, everyone. My first question was on the KRA services business. Some time back, you mentioned about getting into this line of business as well. I was just trying to understand what would be the broad strategy, how would you want to scale this up, how would you differentiate yourself? Any broad thoughts and some specific pointers in terms of strategy would be helpful.
Thank you, Abhijit. Whilst we have launched our product into the previous quarter, the go-live actually happened this quarter. I did not anticipate, but there were delays in terms of integration that is required with all other KRA services, which basically puts the live operations into this quarter, into this month, in fact. Basically, it's an interoperable solution, as we all know, in the KRA. Our strategy, one of the reasons why we've gotten into the KRA business is that we anticipate at some point in time a unified KYC for all financial services, right? That's cutting across insurance, banking, mutual funds, all the kind of asset classes. In the wake of it, it is possible that there could be a very large addressable market, and that is something that we were not willing to or wanted to move away.
More importantly, there is a significant amount of value-added solutions we can add to our current clientele, notwithstanding the fact that we also have relevance for such solutions in all my international business broadly. That was the reason why we got into the KRA business. We are differentiated by our technology. We are the only KRA who has a complete API-driven architecture. Tech solutions are differentiated in terms of how strong, resilient, and quick in terms of turning around a KYC. We can complete a KYC and close it within three minutes to four minutes, much, much faster than the rest of the industry. We have integrated fully with the industry platforms such as MFU. Most of our clients have started leveraging our KRA, who were otherwise using the third-party KRA, so to speak.
We believe that this is phase one, by the way, Abhijit, which is basically provide like-to-like solutions but with superior technology and far better pricing strategy given our frugal engineering capabilities. Our phase two is in works and something that will go live soon is going to bring in concepts of tokenization to the industry. I'm very, very personally invested to, I guess, transform this business. Today, if you see, you get our insurance policy, you need a KYC, you need to open a bank account, you go for a loan, you get a mutual fund, you get something else. Now, the same person gets KYC done, you know, four, five, six, seven different times. With minor modifications, everybody ends up spending money. There is a significant amount of industry cost on a topic which is technically not value-adding to anybody.
It is a very important element in terms of regulation, no doubt about it. It doesn't add any value in, it doesn't make anybody rich, simply put. Probably totally makes rich to the intermediaries to that extent. The tokenization concept basically summarily disintermediates some of that. I would speak more about it when we are closer to launch, but that's something that's probably a global first, in fact, as we will be leveraging probably the most often used words but rarely deployed items, that is the blockchain technology on a complete tokenization solution for the KRA business. Simply put, a go-to-market strategy has started. We have onboarded some of our clients. We have started onboarding several fintech distributors because in today's world, much of the net new investor addition to the industry comes from these large tech platforms and distributors and brokers. We integrated with them.
We integrated with the industry body. We are, in fact, working now with the rest of the world, for example, with the regulators in Malaysia and so on and so forth because they do not have such concepts of interoperability or what have you. We want to take what we have done that's here to the rest of the world, wanting to benefit the local ecosystem. It obviously is also a good opportunity for us to drive our financial growth there.
Thanks for the detailed response, Sreekanth. Just one more, a slightly broader question. It's been a phenomenal turnaround when we look back at the journey over the last five years. In that context, it would be useful to get some perspectives on your own thought process or thoughts on continuing to lead the organization over the next many more years. Any thoughts there would be super helpful.
Okay. Interesting question. This is, you know, as I said, my vision was, you know, obviously duly blessed by our share promoters and our shareholders and the board had been to create a large global fund administrator from India. We have just started that journey. We are nowhere near where we can get to. It's a $50 billion industry, and our contribution to that, as you know, is basically marginal or negligible at this point in time. We are traversing that journey, and I hope to continue to have that opportunity to be able to position taking you into that role.
Got it, Sreekanth. Thank you so much.
Thank you.
Thank you. The next question is from the line of [Shrenik Mehta] from [India M2]. Please go ahead.
Hi, Sreekanth. My question is about the international operations. With Ascent now coming into the picture, how do you see this business over the next few years? Do you see really that international business could overtake the domestic operations in the next few years?
Let's do the math. International business today should be equated, I guess, with mutual fund business plus AIF, right? That is what my international business is also going to be. If you add up India mutual funds and AIF business and equate that with KFin Technologies' own organic international business with that of Ascent' members, I don't see a scenario where the international business will overtake domestic in the next two to three years. I think that gap is too large and too wide. India's mutual fund business itself is going at a very fast rate. We continue to expand at 15% to 20%, which is not a small number at all on a base. Given we have a very large amount of financial inclusion to be driven, I expect there is a fair amount of growth still left behind here.
Our international, however, definitely no doubt is growing faster than domestic, right? I think we're growing at about 30% plus. Domestic mutual funds growing between mid-teens to late teens will mean, and if these two continue to grow exactly around the same pace, there will be a point of convergence. We have done a sense acquisition, again, not just to add simply one plus one equals two, but then see if we can get to a double digit in terms of the value that we can drive through cross-sell, upsell, and leveraging each other's capabilities. There is no doubt in my mind that international will be bigger than the domestic. It's just logical, isn't it? The rest of the world has to be bigger than India, which it truly is. You have close to $200 trillion worth of funds elsewhere in the world.
How much of that can you win is just a matter of our execution capabilities. Over time, as you've seen, what used to be a vision and discussion probably two to one and a half years back when we started having these calls, today much of that has been fructified. I believe that it won't happen in the next two to three years, but I would be surprised if it won't happen in a five-year horizon or around that because keep in mind that the domestic funds will continue to expand at 15% year-on-year. That means that we, on a very high base, mutual funds in India itself will be a much larger revenue. To beat that number, international has to grow much, much faster, and that is what we are hoping to get to.
Today, for example, you know, total share of mutual funds, I mean, total share of mutual funds versus the rest of KFin businesses has dropped to 62% this quarter. Next quarter, we will consolidate Ascent's numbers. Once we consolidate that number, mutual funds will come down below 55%, right? With other businesses growing faster, you know, we're obviously already looking at less than 50% contribution of mutual funds versus everything else. That will continue to, you know, play out over the coming years.
All right, thank you.
Thank you. The next question is from the line of Swarnabha Mukherjee from B&K Securities. Please go ahead.
Yeah. I said thank you for the opportunity and congrats on a good set of numbers. Three questions from my side. First, on the mutual fund segment. I just wanted to understand that of the revenue you have reported in this segment, what is the proportion of value-added services in that? You have given a number of 9.3% of total revenue, which is around INR 20 to 30 crore. Out of that, how much pertains to mutual funds if you can give so that we have a better clarity in terms of how the AUM-based yields develop over the quarter? Last quarter, there was a squeeze. Some color on that would be helpful, whether it is stabilizing at that level and how much is the value-added services component. That is the first question. Second is in terms of the folios in the issuer solutions.
That number has been stagnating over the last, I think, a couple of quarters despite, I think, you have done around 24 odd IPO mandates in 1 H. I just wanted to understand, are a part of the IPOs or, you know, this quarter you have done, are those folios going to get added next quarter, or are there slippages happening from our existing pool? I can understand that the number of folios going down maybe in 1 Q or the prior periods because markets were not doing well. Now that the market has started to recover to an extent, I'm not able to triangulate why this number is remaining stagnant. Some color on that would be useful.
On Ascent, the AUM growth from what you have reported at the end of last quarter and what you have reported this quarter, the growth looks maybe slightly lower than what it used to be over two to three quarters prior. Also, the cost structure seems to be continuing to look heavy. Some color on these two would also be helpful.
Thank you. I will request Vivek or Amit to answer first and the third. I will just quickly answer the folio bit, which I have briefly done. Obviously, we are looking at Q2 numbers when the markets were definitely volatile. There has been a reasonable amount of exodus of the retail investors away from the industry. There is precious little as an organization or a management we can do in terms of folio expansion. What we can do, however, is keep winning a lot of new clients, right? Keep transitioning clients. That's the only thing that is in our hands. How the retail investors would invest in the markets or not, multiple factors play into it. Now, markets have turned around largely in the last three to four weeks, I think.
I'd like to believe that you will see an expanded number in the folio count for this quarter as we come back into the next quarter to discuss this topic. I do believe that it's a one-time activity. More number of IPOs also will bring in additional retail investors. Basically, what happens is initially when the market starts to turn around, much of the consolidation still happens with institutional investors buying and not retail investors buying. Though it may appear that the markets have turned around, that's largely because large FIIs, DIIs, etc., buying out at bargain prices because the markets go down in the past two quarters. Now, if I have, let's say, INR 10 crore worth of investment, and if all INR 10 crore is bought in by one particular mutual fund or a DII, it's just one folio for me.
If that were to be bought by a crore retail investors, that is a crore folios for me, right? As you can see, the market cap would exactly be the same. However, depending upon who's buying and who's transacting has the material impact on our revenue lines there. Yes, I think the initial spurt and growth of our market will not necessarily drive retail participation. Retail participation usually comes when there is momentum. That is when the retail investors start feeling that there is a FOMO, so on and so forth, they'll start coming in there, which I'd like to believe is going to happen sometime around now. Hence, the retail folios should expand into this quarter for the next year. I'll request Vivek and Amit to cover the aspects on the VAS revenue and on the Ascent numbers.
Sreekanth, on the NF VAS revenue, it's currently 5% of the NF revenue. We expect that it will continue to grow. It has been growing steadily. It was about 4.8% in the first quarter. It has grown to 5.2% in this quarter. On the question on Ascent numbers, there is a one-off, one-time $2.8 million hit they have taken. Out of $2.8 million, $2.1 million relates to staff retention because of the transaction. We wanted them to make sure that the core staff continues and there is a retention plan around it. Another $0.7 million is transaction-related cost. If we ignore this one time, they are the same in terms of achieving breakeven and a little bit of profit that they have made.
I'd like to add [to what you said] Sreekanth. Look, the pipeline with Ascent, the book also being very, very strong. We don't see any slippages out over there as well. In this kind of a business, what happens is that while you have been acquiring the private mandates and all, it also kind of needs to tie up with the time when the fund gets launched into the market, which allows you to start the operation and start looking at the revenue as well. It's more about the timing difference rather than getting a perception that there is a softness in the quarter, which kind of picks up as we move into the subsequent months and the periods.
Okay. Understood. That's very helpful. Just quickly, I mean, these one-off costs are done, right? Next quarter would be a cleaner quarter?
Yes. I mean, the reason being because these are all part of the transaction-related structure that we kind of agreed with the team over there. All of those things have already been factored in. This quarter onwards, when we start consolidating, we don't expect any kind of these kind of write-offs. Basically, the one-offs into the book send-off.
Okay, understood. Very helpful. Thank you so much. All the best.
Thank you.
Thank you.
Thank you. The next question is from the line of Dipanjan Ghosh from Citi Group. Please go ahead.
Hi, Sreekanth. I hope I'm audible. Just a few questions from my side. First, going back to the previous participant Ascent, if I were to look at the gross realizations, which is the basis points of average AUM, that seems to have been on a downward trajectory for some quarters. I understand that there was a large deal that happened last year. I just wanted to get some color on what is really driving this realization downward trajectory, and how to really think of it going ahead. Second, I see there has been some restatement of Ascent's 2024 EBITDA numbers. If you can give some color on the purpose of the restatement and what really happened out there. Third question is on your domestic mutual fund business. I understand that there are occasional discounts or renegotiations that happen every now and then.
At least for the next, let's say, 12 - 18 months, is there a visibility on relative stability of this number, except any telescopic pricing impact? The last question is on the cost part. Given that you have been kind of upgrading or scaling up your capabilities across various business lines, how should one think of implementing employee growth? I see that the number of IT engineers in your ecosystem continues to increase. Is there a case where there can be some sort of higher employee cost that kind of gets split over a period of time?
Thanks. Sreekanth, I'm requesting Amit to Ascent, and then, you know, maybe you can pick up about domestic mutual fund, and then I'll pick up the cost. Amit?
Yeah. Thanks, Sreekanth. Look, I mean, Dipanjan, as far as the realizations are concerned, they are in the range of around, you know, 6 to 8 basis points on an average, and we expect that kind of range would continue. Even on the base of the July 2025 numbers also, if you see, I think that translates close to around 6.5 basis points. This is considerably higher than what we have, around 5.2 basis points, in our GFS business. Secondly, Amit, with respect to your questions on the restatement for the FY 2024 numbers, those numbers take time for the audit to get completed given that you need to stitch up the numbers for these 18 odd jurisdictions. By the time the numbers were available when we announced the results for the previous period, these numbers are still unaudited.
These adjustments basically are nothing but just with respect to the audit-related extra provisions for the cost that they have buried into the books. These are pertaining to those numbers. Sreekanth, do you want to pick up the [telescopic pricing] stability? Can you hear us?
Yes, yes. Sorry. I thought you were going to pick up the cost conversation. On the mutual funds, you know, Dipanjan, I think it's, see, we had a material number of contracts that got renegotiated in the past, you know, six to nine months, right? That is obviously a cyclicality in terms of when the contracts have been signed and the duration of each of the contracts. We have two contracts that are to be negotiated, one next year and another one year after that, which may have a marginal impact on the yields per se. I guess it's fair to say that, you know, we will be in a reasonable range bound and there will be stability of yield, and you will not see probably a big drop like what we saw earlier this year into the coming two years for sure. That's on that.
As far as the costs are concerned, see, we have the employee cost, like, you know, like how I explained in the case of issuer solutions, is also semi-linear in the case of mutual funds, right? You know, we build as the new clients. For example, in the last 12 months alone, we have added close to 10 new clients. We have signed four new clients in the last three months to four months alone. Now, for each of these, you know, for a certain period of time, we will incur the cost, and there won't be any AUM and given revenue. Clearly, you will see a certain cost expansion, you know, if I look at it in isolation in terms of headcount, what have you.
That will continue to get optimized, you know, or negated in the form of, you know, our fully purposefully driven, you know, tech capabilities to then productivity. I've explained about FINEX as a program, which is basically our, you know, very strong intent in terms of replatforming it. It's a very complex job, quite honestly. It's like, you know, changing the tires while your car is moving at 100 km an hour. I think having gone live with a couple of modules and with more visibility into more to happen in the coming quarters, that should give us the right kind of support to ensure that we don't continue to expand, you know, headcount, right, and given the cost. Again, just to also add a point, I think what you will see is in the coming years, it won't truly be the cost of people that will be material.
It will start to become your tech costs will become more and more, you know, expensive, right? We need to have an eye on that. Hence, we can tackle, you know, transformation programs. Think of it this way. If it is people, we have other solutions, right? I mean, you can basically look at the bottom of the pyramid. You move into tier two, tier three cities, right? Extended working hours or rather, you know, shift B, shift C, so on and so forth. There are other solutions that you can optimize a human being's cost. When it comes to tech, it won't be that simple and straightforward, right? Much like my clients may come to me for discounts, my service providers, that is, whether it is Microsoft or, you know, Oracle and AWS and so on and so forth, it is a non-linear relationship.
We only get, let us say, in that, you know, price is going up, right? Given the dominant geopolitical situations we are in, they're able to do that. We are actually even more invested in basically solving for the future and not just for a limited amount of headcount expansion, but how do I basically ensure that the tech costs do not spiral out of control as the data component keeps expanding? For every INR 1 of AUM, there is a significant amount of data that gets piled up, right? That's a cost that we pay downstream. There's a large program on that. We have our eyes very firmly set in terms of optimizing costs both on people and non-people costs. I think people costs we've been doing reasonably all right.
You will expect a certain amount of small semi-linearity kicking in, or rather has already kicked in in the context of several new mandates that we have added. Cost of regulation, we now have, and cost of surveillance, cost of fraud detection. Mindful of the fact that none of these are revenue generating, but nevertheless, will add to my costs. In spite and despite of investments into all of those areas, we continue to maintain our reasonably profile on the margins in mutual fund s. That said, we'll be focused on tech.
Thank you, and Amit and Sreekanth for the detailed answers and all the rest.
Thank you, Dipanjan. Just wanted to add to what Sreekanth mentioned that you talked about the telescopic trends stability. You will continue to see telescopic-based pricing reduction in yield of about 3.5% - 4% every year as the AUM goes up. On the cost of IT employees, you know, we still spend about 18% of revenue on IT. The number of transactions in domestic mutual funds alone, what we used to do in 2023, now we are doing almost similar transactions for the first half of 2026. While the overall headcount has gone up only by 15%, volumes have almost doubled in half year as compared to what it used to be. Investment in IT is playing out in terms of reducing the investment in manpower, and investment in technology will continue in the future as well.
Just to add to Vivek's point, Dipanjan, just to clarify here, the yield compression is year-on-year we are talking about on an annual basis. This is not, just taking the cue out of your question and the previous participants' questions, we are not talking about any sequential pressure on the reason, the Q3 and the Q4 and all. This is only on the fiscal year to fiscal year, what we are talking about here.
Got it. Got it. Thank you, Amit and Vivek. Thanks.
Thank you. The next question is from the line of Mohit Mangal from Centrum. Please go ahead.
Yeah. Thanks for the opportunity. I've got two questions. I was looking at your international operations, you know, where a meaningful portion now comes from the GIFT City . I wanted to understand how the underlying economics compare, say, a fund administration pricing for a Malaysian client versus similar work done for a client in GIFT City. How does the pricing and margin profile differ? That's question number one. Question number two, continuing the question on Ascent, basically, the top line numbers look very impressive. I think you told that they have been run off this quarter as well. My question is how confident are we about sustaining or achieving a certain EBITDA margin, and what is the timeframe we should look into that? Yeah, that's it.
Yeah. GIFT City. First of all, KFin does not do private mandate administration, except in a few in Canada or so. Our international business is mostly around mutual funds, pensions, private retirement schemes, as we're aware. We then have to compare, I suppose, our GIFT City yield versus what Ascent, [Tim Gerson], Singapore, etc. As Amit has already clarified, our yield is roughly about 6 to 7, 7 odd basis points in international. That is what Ascent is driving. GIFT City would be no more than 2 to 2.5. Clearly, you're seeing a huge gap in terms of, I guess, how Indian clients pay versus probably outside. That's about 2.5 odd basis points compared to 7 basis points international. Clearly, that will have a huge impact on the margin, right? As in, GIFT City funds and income generally will give you lower margin compared to international.
That statement holds true when you have scale internationally. Otherwise, the cost of servicing a few funds also is much higher compared to the revenue, the basis points that you get. I think that's basically what's playing out with Ascent at this point in time, which is that they have crossed a certain set of funds that are needed in each of the geographies to have gotten break-even at this point in time and will continue to add margins from here now that the core base requirement has been met. For now, obviously, our margins in GIFT City will be higher than the top FS margins elsewhere. That is just a scale conversation into the coming year or so. It will all change very differently.
I'm sorry. I think there was another question the Ascent sustainability.
EBITDA margin. Yes. Very early days, right? I mean, it's a young organization, five to six years, have managed to scale up rather quickly. If you look at KFin also and start the continuum from five years back and see where Ascent, rather than KFin looking from the last 40 years, both of us have traveled a similar trajectory, which is very strong vision, strategic intent, conviction, and support from the board and the promoters to invest in younger, faster-growing businesses to add more to diversified risks, so on and so forth. To that extent, our journey has been similar. I think both of us are just getting started. I see no worry in terms of sustainability. We are looking to accelerate from here rather than thinking about slowing down or maturing at this moment.
Okay. My question was that in terms of a break-even, right, EBITDA break-even, when it would be like kind of possible in any timeline if you could.
It's already positive. With more scale in each of the operating geographies, it will turn, the profits will be in single digits, I'd like to believe for this Q4. We have a very strong operating plan to get in the double-digit margins into the next year.
Understood. Actually, I'm looking at your PP slide number 28, EBITDA $2.7 million negative for financial year in July 2025.
Sreekanth, I'll just take that thing. Mohit, you know, that 2.7 is basically, I mean, after the adjustments of that one-time 2.8, which is what Vivek explained, that there is a transaction-related cost of $2.8 million that they have kind of accounted for in the fiscal 2025. Net of adjusted for that, I mean, it is already breaking even at.
Understood. I think that's it. Thanks, and wish you all the best.
Thank you. The next question is from the line of Uday Pai from Investec. Please go ahead.
Thank you for the opportunity. I had a couple of questions. Firstly, on Ascent again, your nine months' number of EBITDA was $0.3 million. Now, full year adjusted for that M&A also, we are down roughly $0.1 million. We have actually declined in the last three months. Can you give any color on that? That's the first question. The second question is on the NPS side. I think Sreekanth's opening commentary mentioned that it would be moving to an AUM-based fee rather than a fixed fee structure. Can you give some more color on that as well? Those are the two questions.
Yeah, I mean, that's 0.3- 0.1. Those are largely with respect to, again, we will subsume, we'll assign more to the transaction-related costs itself today. There are, I mean, with respect to the counsels and the other deliveries that they have taken on part of their side in terms of the vendor DDs and all. On account of that, the number of another 200 or, rather, 300 thousands that has kind of been added to that cost and all. We expect that, going forward, these numbers will only improve, and more, it will more be a play on the operating leverage because as you add more scale, you won't need that many number of people with respect to the sales or the client relationship team and all.
Even on the operational side now, along with KFin Tech, I think the tech is something that will also provide them the leverage in terms of taking the benefit out of it and then going and servicing rather than deploying more people at the job. As we move into the subsequent period, as we have been saying, FY 2026, it will be neutral in terms of the impact. From the next year onwards, it will be the NPS equator as well. As we move into the subsequent period over the next three to five odd years, we believe the company would come and fall in line with the KFin Tech margin structures as well.
Sure, sir. That helps. On the Indian side, if you can help.
Yeah, I'll take that. See, the current pricing for pensions is something that each of the three operating CRAs quote at the beginning of their license. There is a requirement to renew your license once every five years or so. The CRAs get an opportunity to revise upwards or downwards, depending upon their operating scale and margins, etc. Now, to simplify the numbers, basically, KFin charges roughly about INR 100 per pram today, right?
Yeah.
I think [KFin] is around INR 114, INR 115, what have you. There is a regulatory requirement stating that, in the current construct of a fixed fee, everything needs to be capped at INR 100, which means that it is net neutral for us. It doesn't matter to us because we're already at INR 100. If anything, we'll be able to add another 3% - 4% more to our current price. We're currently at INR 97, and hence, there can be slight upwards in terms of the pricing that we can get. I think there is also a proposal to increase the right now, it is fixed and flat at INR 100. Now there is a corpus-based fee that is coming into play, which means that up to INR 2 lakh let's say, if a subscriber, an NPS subscriber, has up to INR 2 lakh, we'll charge about INR 100.
If it becomes INR 2+ lakh , then it'll get to about INR 150. INR 1+ lakh will get into INR 300, so on and so forth. As pension corpus increases for individuals, and rightfully so, our fees for each of those particular plans will expand. There is a near-term upside. We are also going to see a small bump up in our revenue based on this particular structure. That aside, there is also intent, not just an intent, actually, a requirement to move into a basis point-based pricing, which is something that we are still finalizing. I don't have the numbers that I can offer to you at this point in time. I think we are expected to publish it in the next three to four weeks.
All I can tell you at this moment in time is that it is going to be equitative, margin-wise, because it does not come with additional costs, but then higher revenue in the pension because of the AUM-based basis. It is not just a near-term view. We have to look at this as an industry-wide view, how it is in terms of other businesses like mutual fund services. As the AUM expands because of market-to-market or the net interest growing, there would be a part-taking that we will be taking in the pensions as against a fixed-fee construct. That's my limited input at this point in time, but I'd be in a better position to give you more specifics on the numbers as we finalize and work with the regulator and provide the slides to the rest of the industry.
Sure, that helps. That's it from myself.
Thank you. The next question is from the line of [Priyaan Ranka] from IIFL Capital Limited. Please go ahead.
Hello, sir. First of all, congratulations for the good set of numbers. I would have two questions. Firstly, in the new AI segment, I can see that you have won a few new mandates. Could you share the potential as well as what could be the RTA economics over the same?
No, not really. We have won several mandates. We have 150+ in total, taking our account to close to 650-odd mandates. The economics are fair, depending upon which mandate it is. You know, we have moved away from fixed fee per scheme, so on and so forth. Everything is now basis points, much like, you know, mutual funds are now pensions as well. Depending upon the scope, if it is only transfer agency work, it will be about 1.5 basis points t hereabouts. If it is transfer agency plus fund accounting, it will be around 2.5 - 3 basis points. Of course, market dynamics are good for each of the funds, so there can be a plus or minus in each, depending upon which fund that you're looking at.
Suffice it to say that as more and more funds get added, it gives us the opportunity to drive scale-driven efficiencies, which will be reflected in the margin expansion. We have completed our entire exhaust build. Close to 80% of the funds are migrated onto that, and another 20% are going to get completed by the end of this calendar year. That is going to provide the near-term impetus in terms of the margin expansion and the alternatives. Yes, more clients equals more margin, and same is the case with moving into our QS platform policies, all which should happen within the next two months.
Very good, sir. Pardon me, I was asking on the SIS. I was interested in on the SIS mandate.
My apologies.
SIS mandate. Yes. Yes.
Yeah. The SIS mandate basically mirrors mutual fund mandates. The commissions are the same as what's there in the equity. I mean, if it is equity, it is equity. The pricing is fair. Costing initially could be slightly higher given it's just a brand new asset and there's a lot of different regulations that need to be complied with, and we need to train manpower, so on and so forth. In the near term, it could be slightly lower, but in the medium to long-term basis, I expect SIS to be similar or marginally better than PurePlay PT mutual funds simply because the quantum of transactions won't be as high, even as the nature of the exorbitance of the transactions could be slightly different than the mirroring, more AI than mutual funds.
Very good. Thank you on that. Secondly, I would like to ask on the CRA business. Is there a development that would avoid ANCs to pay for a record which has been already felt by an ANC? Do the current regulations allow this? Following to that, what will this do to your plans for CRA? Thank you.
This is an evolving discussion in the industry, but very critically, the plan—the short answer is yes. This form, and there were discussions that have happened with the Industry Audit and the regulator and the AMC, so on and so forth. It will come to play, I'd like to believe, at some point in time this fiscal year. What it will do to the CRA industry, it is not a net positive for the CRA industry, without a doubt, because much of the revenue comes today from fetching the KYC record as individuals invest in other mutual funds. It's the interoperability cost, so to speak, and not just interoperability, but the fetching cost, etc.
Why it is not as binary, black and white, that you fetch once and you use it hundreds of times is because many a change can happen in between—individuals' addresses can change, mobile numbers can change, or you are in. All those changes mean that what you are fetching may not usually work, and hence, you need to renew each mutual when you fetch again. It's a net negative for the CRA industry, but something we'll have to wait and watch as to how it evolves in the coming quarter.
That surely helps, sir. Thank you. Thank you, sir.
Thank you. Ladies and gentlemen, due to time constraints, this was the last question for today. I now hand the conference over to Mr. Vivek Mathur for closing comments. Thank you and over to you, sir.
Thank you very much to all the attendees for attending the earnings call today. We continue to put in our best efforts to grow the company, both from the top line and bottom line perspective, and our guidance holds good in terms of a return margin of 40% - 45%. In the next quarter, you will see the integration of Ascent and its impact on the top line and bottom line. Thank you so much for joining today.
Thank you, sir. On behalf of KFin Tech, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.