KFin Technologies Limited ($KFINTECH)

Ladies and gentlemen, good day, and welcome to the KFin Tech Q4 FY '26 Earnings Conference Call, hosted by IIFL Capital Services Limited. [Operator Instructions] Please note that this conference is being reported. I now hand the conference over to Mr. Vedant Agarwal from IIFL Capital Services Limited. Thank you, and over to you, sir.

Thank you so much, Iqra. Good morning, everyone, and welcome to the 4Q FY '26 Earnings Conference Call of KFin technologies Limited. Today from the company, we have with us Mr. Sreekanth Nadella, MD and CEO; Mr. Vivek Mathur, Wholetime Director and CFO; and Mr. Amit Murarka, CFO, International Business and Head of Investor Relations and [indiscernible] acquisition. I would now hand over the call to Vivek for his opening remarks. Thereafter, Sreekanth to share the key developments in the quarter. And after that, we will open the floor for Q&A session. Thank you, and over to you, Vivek.

Thank you, Vedanta. I would request Sreekanth to give his opening remarks, and then I will cover the financial section.

Excellent. Thank you. Thanks a lot Vedant for organizing this and for all the S&Ds, very good morning, warm welcome to our Q4 results. You've seen the data. What I would do is over the next 15 odd minutes, walk you through in terms of how the quarter has gone by and large, you are now familiar with the numbers. Hopefully, we'll spend a little bit of time in terms of how we see the upcoming year, and we'll speak about the financials and then Q&A. You have a presentation with you. We kept the content familiar for you so that we don't spend too much time explaining as to what else. But, by and large, a lot of metrics that we have been tracking consistently for over the past 3 years since we went public. We've been in the uptick. We continue to be the single largest investor solution provider in India by mutual funds in the form of a number of asset management companies, we manage. By AUM, of course, we are a second contender. Now that is a reflection in terms of our clients. So, I guess, our performance is probably more [indiscernible] the number of clients we've been. So to that extent, we continue to have a high win ratio into the last year. We won [indiscernible] management mandate and we have several more to come into the coming months or 2. In terms of the AUM itself, we continue to have a market share expansion in the overall AUM, while there has been a little bit of dip on the equity side of it, I'll explain to you in terms of why and then what we see in terms of remediation or the turnaround that we could potentially happen. We continue to be one of the largest [indiscernible] in the form of the number of [indiscernible] and consequently, the number of investors we manage, not just in India globally, we should be among the top 5, and much of the drive had over the past 5 to 6 years ago a gas very well in terms of our market share expansion. So that's on the mutual funds, and we'll kind of keep that more in terms of the the growth percentages [indiscernible] on and so forth. Issuer Solutions has been continually seeing quarter after quarter our market share expanding. At this point in time, we'll track a little over 52% on the Nifty companies by market share in terms of market cap by folios, it is about 45%. And by the count, it is slightly lower. But in terms of the net new client addition, we've been having the highest in the industry. We crossed 10,500. The total cockpit fine till 31st March, we aim to cross -- we aim to get to close to 11,500 to this upcoming year, both in terms of the listed, unlisted and as well as our new focus to expanding to the SME market as well, right, in addition to being the largest region with provider as well as the bond market provider. Largely, you've been -- these are our mature businesses, right, the mutual funds and ratio solutions. And we've been guiding our entire community in terms of what are the new growth drivers assuming a base case scenario of anywhere between 15% to 18% or 19% growth on the mature businesses. How do we then get past 20%? If you see our last 5 years CAGR in terms of propane growth, we've been crossing 20% on a CAGR basis, we will have a quarter or 2 here and there. But by and large, we've been comfortable in accomplishing our own internal targets of 30% plus topline. International business, of course, is our one of the biggest bet. You are familiar with the fact that we have acquired [indiscernible] in the month of October. The quarter that had gone by had been an excellent performance by the inorganic acquisition as well as [indiscernible]. I will do the financial impact a little while from now, we have added close to 499 clients overall in terms of the fund managers. And by funds, then well, it is substantively higher will be anywhere around 900, 950 thereabouts. Pensions smaller business, but as I have explained in the previous quarter, it's a turnaround quarter in terms of us having a [indiscernible]. And we continue to outpace the industry by a factor of [ 3 ]. The overall pension subscribers in the industry have grown about 11% for the full year, including the last quarter, we have grown over 34%. That basically explains in terms of superior technology solutions and the market share we are taking away from the current market leader and keeping a very distant third fairly distant [indiscernible]. [ 116 ] alternate investment funds, Margin plus market share in the alternate investment funds continue to grow at a reasonable clip in terms of the count of the assets as well as on the AUM. Bearing in mind that a bulk of the AIF, we manage our CAT III funds, which have a direct public market movements in on-premise or market standpoint in terms of the stock prices. Times like this, when we have pressure in the markets overall, clearly, as much an impact, the reason on the mutual funds, there has been certain month of impact on the [indiscernible]. But then again, it's a matter of time the markets could turn around and when that happens, we should see a significant uptick. So in that context, I guess, it's been a fairly stable performance, especially in the top line growth. We dropped a little over 23% year-on-year on the overall top line. And that includes sent, of course. And even excluding [indiscernible] grown a little around 11% thereabouts. EBITDA grew able about 5% and margins have compressed and one would expect it to given we have added nearly -- on an annualized basis, we lower $22 million of international revenue with little to no margin, given the very early stage of the entity, but growing at a 30%, 35% top line growth. As I've explained in the previous quarter as well. As we consolidate and drive the synergies in terms of both cost optimization as well as driving big size or bigger sized clients will help us to drive the efficiencies. For example, KFin has won about 5 contracts, 5 funds, rather, which have a little $100 million in AUM, right? And that marks a rather quick turnaround in terms of the ability to bid for larger deals on the back of a stronger balance sheet and a publicly said company strength and the technology capabilities that KFin is able to offer. A full year growth of over 19%. You will see that the core PAT has grown on an annual basis at 6%, but declined marginally or rather we have a flat path growth in the quarter. And the core, of course, is in some sense, it gets it for a onetime exceptional item of the labor code driven inflation that we have accrued in the context of the payroll. Adjusted for that, we've had a flat PAT growth. Q4, especially we had 2 headwinds: one, a significant mark-to-market erosion in the case of mutual funds -- has impacted and that is -- the data is out there for everyone to see in terms of the total mark-to-market write-downs. But to a decent extent, to some extent, at least, it was partially offset by continuing net positive flows into the industry. Issuer Solutions have seen probably a little bit more tent, primarily on the back of 2 points. One, is a continual market orders of the retail investors meant that the retail folios have further come down in the case of Issuer Solutions as well as the fact that in the previous year, we have had demerger of a large listed company which had given a small bump up in the surgical revenue for that quarter, which we did not have that. So in some time, there's a slight base effect impact. But we believe that both these will get neutralized from the quarter onwards. Overall, our AUM has grown in line with the industry at about 21%. But that, of course, did not necessarily translate into the revenues have grown about 11% -- little over 11%. Reasons we all know, part of that was the pricing, discounts that were given in the month of April 2025. And obviously, the base effect of that would get over by the month of 31st March, right? So clearly -- so that was one of the reasons why the overall AUM did not necessarily translate into the revenue, but there has been another 2 important factors. One is mark-to-market erosion, which has a larger impact on EBITDA and a PAT level because what goes from top line for us directly goes from a bottom line, especially if it is to be associated with mark-to-market. Third one is there has been a significant expansion in the passives. I would still think without necessarily being 100% sure of it in terms of if it's a definitive trend or not. The metal ETFs, thanks to the tremendous rise of silver and gold, as we all know, into the Q2, Q3, Q4 had meant that the asset mix for us, our equity has come down by 200 basis points into the last 2 quarters. We have, in the month of April, very early trends point to a reversal of that, which means that the share of ETFs, yields coming down and hopefully, the share of the actively managed funds will go up, which will drive the yield and revenue corresponding to that. We continue to win AMC mandates. We have more to announce in the coming months as we await whilst we have heard in formal communications, we have wait for severance, probably will to announce the same. We have 4 out of the 10 -- top 10 fastest-growing by AUM with us. And I guess all of that will continue to auger very well. We do believe that another quarter to 2, we might just end up having 5 out of the top 10 AUMs seems to be serviced by KFin. Issuer Solutions at briefly spoke about it. We have added about 740-odd cliental. Market share expansion from last quarter through now by a little about 80 basis points. We have continued to invest our efforts to orchestrate transitions. We have a transition successfully funded National Bank, which has a very large retail folio base and [indiscernible] well and many more to come, hopefully, in the coming times. More importantly, we are awaiting the launch of several large IPOs into the coming quarters. We are all obviously awaiting the geo IPO as well as several large ones how many of those hopefully should happen into the coming quarter to two, that well put issue solutions in a much better step than what we did in the previous year, many in [indiscernible] have been withheld in the context of where the market is. Of course, it is still anybody's guess in terms of which where the markets go. It is possible that it will be Hunky-Dory in a few weeks from now or it could be worse. But we have assumed a fairly conservative estimate as we are moving into the coming year in terms of where we believe we will end up with high-level numbers, which we will speak about in a little while from now. From an alternate investment fund standpoint, continue the similar expansion. The AUM has grown about 19% revenue larger than that, despite the fact that it has been a mark-to-market erosion even in this case, given much of the funds we manage our CAT funds, right? And obviously, where there is an adverse impact, and we still have a lot of a little over [ 22% ] growth and margins going low 37% will mean that as the markets turn around, we should go back to a much brighter days into the coming quarters. By and large, our solutions on technology, data, wealth have on strong resonance in the context of us winning our international management [indiscernible], several more into the pipeline and not to mention the completion -- very successful completion of our largest contract in international in the Philippines largest bank, third fund accounting. And the proof of funds that basically now leads into the execution phase, which has pretty much started now. And with that included, we are looking at a pretty robust international revenue the organic revenue to grow a little lower 60% plus into this year and the overall international revenue to be a little over 70%, including that of and so to speak. National Pension system, I'd like to be to continue to expand in the same trend that we have seen in the past 2 years. So we have excellent partnerships with all the PFMs, the POPs and [indiscernible] regulator. We have created the country's first gig economy, a pension platform. We have created the countries first health work -- the health-related insurance unpledged driven, I guess, withdraw all the funds by any person meeting to undergo surgery so on and so forth by liquidating part of NPS. So these are some very unique and important technological sources, which are going to drive pensions into very fast closer into the coming year. And it also obviously all is very well that we have moved away from pricing at a plan level but into a basis point, which is akin to the [indiscernible] fund business. So as the corpus of the AUM increases, we will pace the gains and not necessarily limited to the count of increase of the pensioners in the country itself. We have -- in terms of the overall industry, I'll just quickly cover overall year performance, but most basically about KFin Tech. Despite what could be considered as a very challenging year. I think we have continued to see a strong performance by the overall industry, the mutual fund industry AUM has still grown. And we expect a similar growth into this year as well on the back of a potential or a possible turnaround in the market, which we have not backed a whole lot. But even the velocity of the net cost continues to be strong and resilient and given our clients have been growing at a pretty fast clip, we should continue to see a reasonably robust performance this year as well. The equity AUM, as I said, is a little bit of both in terms of the market share coming down a little bit, but that is largely relegated 2 important factors from RFS. One is many of our clients have been very optimistic about passives. Consequently, much of the passive fund movement and mobilization in the industry has happened with our clients. But obviously, as downstream impact on the yield. But then again, as I said, this is probably capitalizing on the near-term trends of the metal ETFs. And we could see already in early April or for this month as of yesterday that there's been a reversal of that trend. The second one, just in terms of the configuration of the funds we start, I think our clients need to have lesser high-grade funds as compared to the clients that of our competitor. And if you saw the growth of the past 3 quarters in mutual funds, there's been a good amount of good that has come through into the hybrid funds. I'm sure it is a trend that our clients have -- have seen it and probably they would [indiscernible] hybrid funds and then probably flow back into the market share that we want a lot more on equity side as well. Asset inflows continues to be strong. We hold a little over 37% of the market share in that space and continuing to grow. The number of [indiscernible], of course, is more related to the issuer solutions, again, despite being traveling near or something year-on-year growth is not a small number, which already has a very high base of live INR 25 crores or DEMAT holders within the country. but that has not necessarily translated into investments into the secondary market by the investors. There has been a net erosion of close to 1 -- almost 2 million folios in this year. And in spite and despite of it, we have shown good growth, decent growth, I would say, in corporate registry, only and only because we managed to win a substantial number of IPO managers into the previous year, which has contributed to that, which otherwise would have been a negative in terms of the full year erosion that has happened into the previous year. And with the retail investors coming back, it could just very well be a scenario where we have a substantial net new client additions and substantial new colo additions, which would drive the growth into the higher 20% numbers, but we have acted little over 50% for the coming year. Overall, domestic mutual finding a little bit of color in terms of what the market share we have already spoken at about, 33-odd percent close to the overall market share. So we're continuing to expand. As you could see, the trends from FY '22 to FY '26. Consistently from 30.3% to 32.4% has been a market share expansion even if it is a little slower into the coming quarter. But this is how cyclicalities of industries, certain AMCs do very well for a period of 3, 4, 5 years and then you will see a different set of pains -- very, very well into the subsequent cycle. And it would just very well be our fans into the coming year or two. But of course, that's not necessarily in our hands, as we still believe that winning the mandate is important, providing technological edge for our clients to grow faster is all that we have in our controllable [indiscernible] is something that is dependent on how times perform. Overall, I guess, given that our market share has been pretty resilient even during this time, we believe that as the industry grows, we'll continue to grow alongside or slightly higher than the industry into the coming quarters and years. By and large, most metrics trend to positive, whether it is net flows, whether it is IP in terms of the inflows that are happening. The transaction volume continues to see a fairly large growth in terms of the ticket size coming down, especially in the context of [indiscernible] and a lot of other initiatives started by regulator and amply with the view to drive financial inclusion in our country. On the International Investor Solutions, clearly, our present acquisition, you will see a significant dramatic expansion of the net new clients. What used to be 75% in the previous year, now is a little around 500 clients. And even if you exclude the inorganic to the pure organic client expansion has been quite substantial from 76 to let over 100 and [indiscernible] the combination of both your [indiscernible] as well as on accounting. In the last 3 quarters, we have announced large deal wins in the GFS, so it's not just account, but what you're now seeing is the wins of large deals. And it is with that confidence that we are looking at about a 60% plus growth in the GFS in the upcoming year. And obviously, mark-to-market still will continue to play a certain amount of core in it. And with the last it can be much higher than that, should the market turn around with macros improving overall, right? In terms of International portfolio itself, you'll see Slide #30. It has a very diversified mix, which offers the hedge rise in terms of in years like this where the markets are fairly tepid. The coverage is across hedge funds, public market funds, regional assets, power equities, so on and so forth. It is possible that at any given point in time, some of these asset classes can have a hit, for example, additional currency funds. It is also possible that the same kind of significantly outperform and I guess, in some sense, overcompensate for one or the others. Geographically, too, we are very well diversified now, 18 countries, as we all know. In terms of the revenue contribution outside of India, Malaysia, Singapore, Cayman Islands and Hong Kong are our [indiscernible]. Middle East was expanding quite rapidly, but obviously, with all that's happening in the last couple of months, it's a wait and watch. But what would nevertheless will happen even if there is a downstream impact on the GCC side of it, much of those funds would be redomiciled into Singapore or wherever. And the good part about us asking the way we have is that it doesn't matter where it gets redomicile or migrates into, of course, we have a presence in all those geographies, which will mean that we will have a very little to no impact at all even if funds would more so of the Middle East, so to speak. On the Issuer Solutions, we believe that the trend will continue to expand in terms of both the number of the clients and portfolios and the market capitalization, given there's been a significant renewed push, we have also leadership additions in this particular line of business to be able to capture times like this where, I guess, the resilience of the financial strength of KFin vis-a-vis other competitors in this space, especially on Asia solutions. We have a formidable strength which we will -- we will start seeing in the form of net new client wins as well as driving higher revenue and margins in this business. AI, as you could see, there's been a substantial improvement in terms of the number of funds, [indiscernible]. So it marks a year a little over 3-fold increase in as many years. And I hope the trend will continue, both in terms of new fund launches and our continued wind rate across domestic, international and in the GIFT City as well. The AUM itself, slightly deferred in growth coming from the previous year, just about 19%, but again, just like in case of domestic mutual funds, as I said, given much of what we do is capture funds, there has been an impact here as well in terms of the AUM growth. It would have been more than 20% in a barrier like this. NPS wouldn't deliver much on that. I'll spend a little bit of time on the -- how do we see the upcoming year, right? I mean we are looking inside and despite of what's happening in the market and the global uncertainties we have believed that we have a a reasonable line of visibility to get to about 23% to 24% top line growth into the coming year. Now this isn't necessarily a guidance, but as much as, I guess, our bottom-up projections internally, how these Unlike in the past years, we will have to recall [indiscernible] correct nearly every month from here on, given everything happening in the market. EBITDA, we expect it to be around 16% to 17% and a little around 10% growth is what we expect to see into the coming year. Now as I said, this is a conservative base case, should the macros improve and if there is a quick turnaround -- in some times, even with a little bit of positive news late March, early April, we already saw the markets to perform much better, right? And if I look at April, for us, we have seen a 3%, 2.5% thereabout increase month-over-month, and that itself should give us [indiscernible] in terms of if the macro were to dramatically improve, we can see a very, very substantive tailwind, saw significantly enhancing both the revenue and the patent that I just spoke about. Even the stand-alone, that 20% I was talking about [indiscernible] I was talking about is broadly consolidated version. Even organically, we believe we have a line of visibility to grow close to about 15% and PAT little by 11%. Now the margin compression this year was obviously large on account of 2 important factors. One, obviously, is the consolidation of accounts with asset, which we all knew that there was going to be a downstream drag into the overall margin. The second one was a obsentive mark-to-market erosion that happened in Q4, in conjunction with a reasonable drop in the Issuer Solutions because of the retail investors moving out now. All of these factors are no longer will be applicable now, given the mark-to-market movement has seen uptake retail participation has improved in the month of April and should this trend continue, we should have a much better quarter ahead of us. Given this, the focus had been more in terms of controllables in terms of effective cost management and tightening the belt in terms of the discretionary spend. We have we believe that we have enough levers that I've always been maintaining that if we see a protracted down trend, we will definitely control the tap. I still do not believe that we are in that region of having a definitive view that there is a protracted downturn given the volatility. But we definitely have ensured that we have at least all new projects are going to be suite [indiscernible] greater detail of approval mechanism, cost management in the form of payroll on payroll or something that has been significantly enhanced. And despite that, with a little bit of tailwinds in the form of top line, that gives us as well as additional as we have in the cost optimization. Hopefully, we will be in a position to meet the numbers that I just spoke about into the coming year as well. So that's broadly from us, a broad summary, good top line growth, agreeable, I guess, bottom line growth, if you especially adjust for the onetime exceptional item of the Labor Court to then cost inflation, which is not recurring in nature now. We've taken hard from significant market share expansion and our goal to reduce the dependence on the divest mutual funds to be below 50%. At this point in time, we are 58% to be specific. And there is a 3% value-added solution to win revenue that we get from the clients. So if you exclude that, which is purely tech revenue, it is 58%. And we said that we'll get to 150% over a 5-year, we believe that we'll be able to beat that sooner than we had anticipated, given we are looking at a little over 70% plus growth in the international business into this year. With the other businesses growing much, much faster than the 2 businesses, we should be able to have a much more diversified revenue and hence, much better managed risk profile as a business that we have today. I'll take it off calls. I'll hand it over to Vivek to quickly consolidate the financial highlights and then we'll take the questions.

Thank you, Sreekanth. On the financial performance, let me start with revenue. The overall revenue grew in the year at about 19.3%. And for the same quarter versus last year, it has grown by about 23%. If you look at -- excluding [indiscernible], it has grown for the same quarter versus last year by 4.6%. And if you look at sequentially, sequentially, there is a degrowth in terms of the overall revenue by 6.3% and excluding Ascent about 8.5%, that's mainly because of mark-to-market correction that happened in the second half of the year because of the geopolitical situation and movement of asset mix towards metals, such as gold and silver. And whatever was perceived as mark-to-market gains through coming to the mark-to-market movement in the overall AUM growth was little offset by the mark-to-market losses on the equity side. So that resulted in a subdued performance. And also in the Issuer Solutions business, the corporate actions tepid because of the consumer [indiscernible] situation in the last quarter. And also, there was an exodus of retail clients on the participation in the equity market. So that also resulted in lower number of folios giving us income in Q4. So I will give you a flavor of how the revenue looks like at the end -- in Q4 on an overall revenue mix domestic mutual fund gives 60% -- 61% of the revenue. Issuer Solutions now gives 10% of the revenue. AIF Private Wealth Management payments gives 4.5% of revenue. GFS gives 4.5%. Ascent contributes 15% of revenue. NPS, the bile exagram are just about 1.5% each in terms of the revenue contribution. So that's the breakup of revenue. If you look at expenses, the expenses lots of Ascent have gone up in terms of the overall expenses looking like the employee expenses, including Ascent have gone up by 30%. But if you exclude Ascent has gone up by 13%. And the EBITDA margins, therefore, if you look at for the whole year, they have gone up slightly in terms of 5.1% growth. And sequentially, 15.2% down for the reasons I explained because of the indication mark-to-market impact and lesser action on the Issuer Solutions and similar impact because of market [indiscernible]. But if you look at excluding Ascent, our margins were almost 42% in the quarter. And for the whole year, excluding Ascent was 43.5%. Including Ascent, we have maintained EBITDA margin, which is the guidance we have been giving. Although in the quarter, it was 37% because of the reasons I explained. But our range of 40% to 45% is something which we have maintained for the year. And as Sreekanth talked about, we are working on various cost optimization initiatives and to improve productivity, leveraging technology investment and AI, which is coming to play. Which will help us in terms of sustaining these difficult times if the mark-to-market continues to behave in this volatile manner. We also expect the mix of AUM to change as metals have corrected and retail industries continue to maintain a robust society. We do expect equity to come back. But irrespective of that, we are preparing ourselves to create the operating leverage by working on the cost optimization initiatives. So the core pack for the whole year went up by 6.2% at INR 353 crores, including Ascent. And the increase was 8.1% for the year without Ascent. For the same quarter last year versus this year, there was a growth of 3.8%. And if you look at at margins, we are at 27.1% on a consolidated basis. Without Ascent, we were at almost 30% margin, which is the guidance of 27% to 30% that we have been giving, and we have maintained that. If you look at the overall diluted EPS, it's currently at 19.8%, with Ascent and without Ascent, it is 20.16%. We are happy to take questions now.

[Operator Instructions] The first question is from the line of Karthik Chellappa from Indus Capital.

Two questions from my side. The first one is just taking a cue from the comment that was made on the asset mix as far as the double [indiscernible] business is concerned. If we were to assume that the material mix is more or less stabilized or possibly even declining, and is that were to be the case for the for FY '27, can we say that our original expectation of domestic MSPs be down, let's say, about 4% to 5% year-on-year on a steady-state basis. Will that still hold true? Or are there any other variables that we should [indiscernible] Thats my first question.

Good morning, Karthik. I'll take that question. So the numbers that I spoke in terms of what our projections for the upcoming year. assumes a continuation of similar asset mix as we have ended with the previous year. Though as I said, I do not necessarily believe that asset mix will be with ETF almost at 23%. I believe the mix will be more in favor of actively managed funds, this year. But in the base case of the number that I said, we consider the continuation of ETFs to be around the same number.

Excellent. And just to clarify, Sreekanth, your original guidance, which you just -- which you just shared right now is at the consolidated level, you expected a revenue growth of about 30%, 23% and an EBITDA growth of 16%, 17%, right, at the consolidated level?

That's correct, Karthik. It's more towards 24% to 25% top line and yes, EBITDA to around 16% to 17%.

Okay. Excellent. My second question is, as far as the Issuer Solutions is concerned, if I were to just look at the quarter, in absolute terms itself, both the revenue and the profits are down. Now you did only the form factors, which are consumed. But if I were to exclude those and look at it on a steady-state basis, what is the expectation as far as the revenue growth for this particular segment is concerned? Because what we see is I do see the portfolios are weak, but they're still reasonably okay and so are the transactions. But it looks like it's the realizations, which have actually taken a bigger hit driving the decline. So I was asking the question more in context of that.

Sure, Karthik. No, so I get what you're saying. So the Fios may look decent in terms of growth, but that was largely because of superior performance in terms of new wins. So the new wins have added a little over 2.5 million, 3 million folios. But the fact remains that all the existing clients are we lost over 1.7 million folios, right? And that is largely in the context of retail investment is not a lot of active interest in the secondary market, given the mark-to-market write-downs over the past quarter or two. Now that will change, right? I mean it's a seasonal business, markets will go up and down, but retail investors will come back to moment to see here. why do you still see the drop in the revenue numbers. And there are 2 big reasons, right? I mean 3 big reasons. One is the folio reduction as I told you. Second is the corporate actions. Traditionally, Q2, Q3, Q4 are the corporate actions quarters in India, Q2, Q3, more stronger than Q4 traditionally. But given, again, significant headwinds that the entire economy, especially at our financial level is facing. The corporate actions declared by the corporate India have been far and few, right? Now, so that has impacted our revenues into Q4. And there is one third item, which is a smaller impact, but nevertheless, an impact, which is that we had orchestrated a very large demerger in the Q4 of FY '25, which had a onetime exotic ramp up in revenue, which did not obviously have it. So that means there was a slightly higher base in the previous year. That said, here will -- we should see some mergers, demergers some of the demergers that were to have happened in the month of March have now been pushed to May. So which means that there is going to be a little bit of lag in revenue, but that will come in up in the quarter more or less right. So those are the 3 reasons, it bit of Folio erosion. Corporate actions being extremely low into the Q4, which will change as the corporate profits of the country [indiscernible] and in general, once, I guess, it is a little bit of certainty coming back, then the companies will be more confident in declaring dividends and so on and so forth, which was not the case because everybody was in our cash conservation more into the previous quarter.

The next question is from the line of Rajit Agarwal from Miller Advisors LLP.

Just to start off with a few clarifications. Now the number of new clients added in Ascent is about 62. I mean that's like 20% of what they had last quarter. So that's a big number, right? And what really changed in this quarter? And do you expect the run rate to carry forward?

Absolutely. I mean the -- so again, just to put things into context, Ascent started about 5 years back. Today, they have the numbers are not up close to 800, 850 odd funds and they're increasing by the day. So until and unless we are adding 2,000, 1800 funds every year, we wouldn't be getting this far. So to that extent, I would expect the trend to be even faster into the coming quarters and years. The same issues we face in India are being faced everywhere in the world as well, right? I mean -- so to that extent, despite a fairly distressed financial markets across the globe and fundraising activity being a little tepid. And the same is the case with investment activities downstream, I think some of growth actually is slightly benign compared to our expectations. But I do believe that as the turnaround happens, we should see numbers higher than 60% that you saw this quarter.

That's wonderful. But at the same time, when we are talking about the EBITDA outlook for FY '27, it doesn't seem to factor in much of an operating leverage that we were hoping going to kind of see from this quarter or the next couple of quarters. So how do we look at the expense side of in Ascent?

See, I think if you see the split, the EBITDA numbers for the stand-alone KFin account -- when I say stand [indiscernible], we have other subsidiaries also part of it, including the ball, et cetera. But excluding Ascent, EBITDA margin this year, 2 have been very strong, right, close to about 43. We are expecting that number to go up into the coming year. What we have been saying is case in stand-alone in the past 3 years, we've always maintained -- we will be able to return 40% to 40% EBITDA numbers. Now even after acquiring assets and consolidating Ascent numbers, we are still looking at the same 40% and above. Now that obviously would not have been possible until and unless there has been significant driven efficiency gains that are coming through. For a business that has a significant growth potential, right, starting new geographies, getting into new asset classes, significant business development expenditure for us to win new mandates, so on and so forth, one would expect that expenditure will have a downstream track. So what really is happening is a lot of productivity gains driven cost optimization is funneling and fueling the growth. Like you mentioned, if you are winning these many number of mandates that has to come largely in the form of significant [indiscernible]. So if you are looking at a fairly mature business, if you just take a look at only India business without having to try to growing global and launching new businesses like well so on and so forth, you would see a significantly higher leverage than what you're seeing here. I guess what I'm saying is the productivity is fueling the growth. Till such time, we have a huge growth visibility, market share gains, we will continue to do it. And so long as the margins, as we have been maintaining around 40% to 45%, hopefully more closer to 45% to 40%. I'd like to believe this is a good strategy for us to fuel growth rather than just using the product [indiscernible] back as well.

Got it. That's very helpful, sir. And just a quick clarification on the numbers. And now I'm picking the numbers on the slides that you have shared on consolidated financial summary, excluding and including Ascent. So if you look at the EBITDA of Ascent and PVD and PAT, so the difference between EBITDA and PBT seems to have gone up for Ascent in this quarter, and similarly between PBT and PAT. So why is that happening if you can quickly -- I mean the depreciation somehow increased on Ascent and are we paying tax in an despite net negative profit before tax?

I'll take this question. This is Vivek Mathur. So there is an amortization of the assets that we acquired from Ascent, including the client contracts and the brand valuation, which was done which is getting amortized over a period of time. And that is where you see the gap, and that is something which will remain consistent because it will be written off over a period of time. And this will actually sustain in terms of as the business grows and Ascent continues to grow that business start building operating leverage. That's why to answer to your question as to why we are not seeing operating level, it doesn't come in one quarter or one year. It's a process which you will see in coming quarters. And when we acquired the [indiscernible] guidance that -- you will have to be with us for 2, 3 years to see the impact of growth and operating leverage. And we are working on it. You see a good growth in terms of the revenue growth of Ascent and then equity are doing in terms of number of funds, a number of clients, which over a period of time... [Technical Difficulty]

Sorry to interrupt. Sir, your voice is breaking.

Can you hear me now?

Yes, this is good. Please proceed.

Yes, that's it. So as we grow as a business, the operating leverage will kick in to offset the impact of the amortization and depreciation of intangibles.

Understood. And is there a currency benefit in the top line of Ascent -- as the top line growth of Ascent?

So actual top line growth is 5%, but in INR, you will see about 8% growth. That's sequential.

Next question is from the line of Jitark Shah from Union Mutual Fund.

Sir, just one question. Any thoughts, you will have on the DR changes -- How are you reading the changes in the TER norms effective this year? And going forward, how are you anticipating the changes that will be passed on from the large MS because most of them have been talking about managing the margins going forward? That would be helpful.

Sure. Thank you. As we have given our [indiscernible] the previous quarter, bulk of our contracts have been negotiated in the previous year, right? We have one each for this year and to the upcoming year. The negotiated contracts also take into account the TR driven reduction that the clients have been facing. And given that there is no net new impact that we have. But at the same time, please do bear in mind that the AMC results that you have seen in the past 3, 4 days, 5 days. So they're all operating with EBITDA margins up north of 60%, 65%. So clearly, there is no yield pressure, margin pressure for the asset management companies. And that's largely because registrars have been single-handedly been -- they're using the cost to serve, which is operations is one of the biggest cost. And against 16 basis points on yield, our yield is just about 3%. I mean so that's 3 basis points. That transfers to less than 5% of the total biggest operating cost will be managed by us and reducing it in a year. So we have already passed on much of the benefits that go into the previous year, and there is no additional discussions on this topic.

The next question is from the line of Supratim Datta from Jefferies.

I have 3 questions. in the first one. Based on the guidance 20%, 25% growth, 16%, 17% EBITDA growth. It seems like you're building in for an EBITDA margin of somewhere around 38%, 39% in FY '27, including Ascent. Previously, you had indicated that after Ascent integration also you will hold on to a margin of somewhere around 40% at the EBITDA level. So just wanted to understand has -- is there some new development that has happened because of that you have moved youe guidance? And secondly, just wanted to understand what all is included in the guidance? It seems like the guidance includes and in share of 23%, 24%. Does it also include the fact that the cost growth [indiscernible] so just wanted to understand on the cost and AUM, what are you assuming? That's the second. And lastly, on the Ascent side, there based on your release, it seems like you have gotten $600-plus AUM funds this quarter, assuming that you get somewhere around 10 basis points, 10 basis points, that should add somewhere around 4%, 5% to your revenues. Just wanted to understand if that that math correct? And when does this revenue start kicking in, does it keep in over 2, 3 years? Or does it start kicking in from FY '27 itself? So if you could give us some color on these 3 things, that would be very helpful.

So I'll address a few and requests Vivek to address a few of these. In terms of -- so first of all, it's not necessarily a guidance where we do not give formal guidance to the Street in our projections. Basically, your math is right. I think you're looking at close to 39-odd percent. We have estimated with the sense of unleasing from the hindsight of what happened in the past 2, 3 quarters in the market. As you know, we are in a business which has a very, very strong connect to the market. And we cannot -- and even the range that we gave, obviously, is slightly broader than 1 -- what you may like or even what I would like to give, but it's partially because of the vagaries that we have a dependence on the market. And hence, our business cannot be looked at quarter-to-quarter month to month as a business on a compounding year-to-year basis. We continue to look at a 20% top line growth, margins around 42%, 45%. You may have a a transient quarter or 2 where there may be a trip or you will also see quarters where the numbers have gone to 48%, 50% thereabouts but eventually averaging down to that. We still have a very strong visibility to 40% EBITDA into this year, right? If you hold the math backwards, it's close to 39%. But of course, the numbers that we spoke was at the time of Ascent acquisition, which is probably the last workshop that we had was some time on your back. And obviously, the world was a bit at a very different place at this point in time, right? And we said even at that point in time we will still maintain [indiscernible] 42%, 45%. And with the world being dramatically different today, we are still saying that we have the confidence to get that part. So I guess, in some sense that speaks about the resilience of the business as well as our own capabilities to manage the costs in bad years or tepid years or years when they will be completely decided there's movement. One must also understand that our business growth in non-mutual plan and Issuer Solutions, which is a mature business comes at a slightly lower margin which are all aware, right? Because these are all brand new businesses built over the last 3, 4, 5 years, and they do not necessarily at the business unit level contribute to the same margins as our mature businesses do. So if you see years like this when Issuer Solutions and mutual funds slowed down a bit because of the market vagaries, but our top line growth still dramatically at 24%, that means that this is going to come with revenue coming from businesses which are not contributing to the same margin level and hence, you will see a certain amount of margin measures. But despite of that, we are still to get to 40% or slightly above that. But the math that you said would be somewhere around 39% in terms of number that I told you those are drop out of not exactly precise numbers. We are slamming to cross 40% into this year. So was the first on the guidance. I mean on the EBITDA numbers, I'm happy to take down if you want a double-click on that. On the Ascent Fund Solutions, on the new funds at $100 million. The revenue will -- obviously, each of these contracts are in different regions by different clients, and the start date for each of these is not exactly the same. One contract has already started late last quarter itself, in fact, the week of March thereabout. So you will be able to see full year revenue for that. Of the remaining 5, 3 will be starting a later part of this quarter and the remaining in the [indiscernible]. Now these are obviously the deals that have already been signed. We still have a pretty steady pipeline of many more such hundred million dollar fund deals, which we are hoping to consolidate in fact in the coming quarter to 2. So what you're talking about is the one that we have already signed, obviously, to they will find more. And the timing of the launch is obviously depends on a lot of things. I mean you're already [indiscernible] about these markets. So should the market look benign for fund raise to happen as well as for downstream investments. I'm sure the funds will launch sooner than later. It is also possible that if the macros were to materially be jeopardized, then despite winning the contract, we might just have to defer the revenue because the client has yet to launch the fund. But we have factored, I think a certain amount of revenue from all of these 6 funds. So the precise numbers won't be to divide, but that it's fair to say that about 3.5 to 4 contracts worth of revenue would have been fully baked into this year. And it is possible that it can go all the way up to 6. If they're on good enough and should we win more deals, which we are hopeful to that number can grow up even further from here. The other question, sorry, third one was on the cost, my apologies, I could not get to that. Vivek, if you have, could you answer that, please?

Sure, Sreekanth. So in terms of the cost optimist initiatives that we are taking, you will see that we are trying to protect 40% margin because Ascent adding almost 15% of the global revenue. Margins, which are just about 5%, 6%, will go up to early teens. Still there is a lot of cap between core KFin Tech margins and Ascent margins and that operating leverage will come over a period of time. Therefore, we are tightening our wealth within Ascent Tech to create that operating leverage to protect 40% margin. On your point on Ascent bps, it is actually not 10 bps, Ascent is in the range of 6 to 7 bps, and that is what you should factor if you are modeling anything. But suffice to say that Ascent will continue to win other clients, more clients and 25%, 30% revenue growth for them is a good growth in an international market in a competitive environment. We are working with them in terms of creating operating leverage and giving the enablement and capability to command premium in the market by developing solutions like simulation for wealth managers or for fund managers and LPGP reporting, which we have been talking about that [indiscernible] team and Ascent team are working together. So we are working religiously in terms of creating that unique advantage, and you will see the results of that in times to come.

The next question is from the line of Dipanjan Ghosh from Citi.

Just a few questions from my side. First, if I look at your presentation, and you have broken on the revenue into various streams. If I look at the Alternative Private Wealth and PMS revenue, whether you look at quarter-on-quarter or I look at year-on-year, there seems to have been a meaningful drop. And in conjunction with that, also the OPE revenue, which if I look at sequentially, there has been a decent drop, even Y-o-Y, it looks flattish to down. I'm just talking for a 4Q perspective. So just wanted to get some color on what's really going on out here. Second, in terms of your Ascent and new client [indiscernible] could you give some color? I mean, would this be like small long shot funds, HFTs, or this would be like large fund structures like one you had historically within the last 18 to 24 months? So just want to get some color on the [indiscernible] proposition. And the reason I ask is because if I go back in time and look at Ascent yield, at one point, it used to be like 8 bps. Now you're down to like 6, 6.5 bps. So what's really going on here?

Let me address the second question first and then talk about other things. I think the yield is obviously a factor of, as I said, multiple things, part of that is pricing. Part of that is asset mix, right? I mean, in years where you have for example, crypto in the digital currency funds is one of the bigger basket of the total fund solution that we as an task. Now Crypto has for example, have seen fluctuations up and down. And to a certain extent, that may offset with the growth of the yield of a more stable asset class or it can significantly enhance depending upon which way some of these move. So given that the asset mix drives a very important factor in terms of the overall yield, it is possible that intra-quarter or inter quarter within the same year, you will see these numbers. But Ascent was always around 7 bps, I do not believe it was average 9 basis points thereabout. So with a plus or minus 50 basis points, you should see that movement, which can work in your favor or against you, depending upon which asset classes performing in which manner. On the alternative front, I am -- sorry, I'm can tell us where exactly you're looking at? I probably missed that point.

Looking at your presentation [ 18 ], 4Q '26, I see the alternative private [indiscernible] at INR 16 crores, in third quarter, it was INR 20.7 crores, in the fourth quarter of last year, it was INR 18.3 crores. I'm quoting from your presentation.

That is Slide #22, Yes. So I'll take that. So basically, the alternatives, Private Wealth and PMS, there are 3 components, as you can clearly see, right, AIF, the well and the PMS. I is the larger part of it. And there, that is where you saw our continued market share expansion as well as the net new fund addition nearly 24%, 25% AUM increase and equal number of April increase in the form of the overall number of funds itself, both the AUM as well as on the funds. [indiscernible] Private wealth and TMS was where there was a little bit of an impact, again, largely on account of mark-to-market, right? I mean you have fines which are, all of these are directly linked to the market. And there's been a reduction, as you saw from Q1 to Q2 to Q3 to Q4, which with each quarter, there has been a markdown in the valuation of the underlying stocks and go the total AUM. Also in the case of Wealth, we have won 6 large contracts into the early part of the year. And wealth is more a platform play, in some cases, especially when you go to the large wealth managers. But if you are dealing with a new wealth manager, it is a full service model, much like how we do with Asset Management space, right? So it is applied from our people, we are basis points on the outcome. So the deals we have won into the early part of the work platform deals, which meant that there was a slight uptick in the revenue for the quarter. Some of the other deals into the Q3, Q4 could not be materialized again because almost all entities have been on wait and watch and cash conservation model. We do believe that many of those deals that have been withheld for closure will get fructified into this quarter.

The next question is from the line of Abhijit Sakhare from Kotak Securities.

First question, if you could just broadly indicate what were the Ascent EBITDA margins in the fourth quarter? And secondly, make question is the point around the depreciation or the amortization of intangibles? How do we think about the impact coming from there into FY '27 and FY '28 as well? And secondly, there was also a labor code impact that came in, in the fourth quarter. whereas what you've seen across most of the other companies and sectors is that everything was absorbed in the third quarter itself. So some clarification there would be helpful.

Sure. Vivek, do you want to add to that?

Yes, I'll take that. So the in Q4 margin was 8%. And what was the second question on the amortization that we have -- the amortization actually in [indiscernible] in Singapore is valuation of the client contracts and brand against the goodwill that you pay and you get it extremely valued, which is amortized over a period of 10 years. And that is something which is around [ INR 6 crores ] which is having an impact on the consolidated PAT. When you merge Cape in Singapore, Ascent with KFin Tech. On the labor code onetime impact, INR 12.6 crores for the whole year, which will not bear from FY '27 numbers. This was a onetime impact.

Okay. Yes. And then like when we think about FY '28 as a year and then the delta between the EBITDA growth and the PAT growth, would you expect some convergence in the year 2028, between the 2 numbers?

In terms of EBITDA and PAT...

-- so for example, F '27, we are sort of indicating a high teen EBITDA growth and a PAT growth of like low double digits or so. So the [indiscernible] between the 2 numbers, how do we think about it from an FY '28 perspective?

Yes, it's still narrowed down. It will go in almost similar range because you would have -- if you look at FY '28 over FY '27, it would have been normalized.

Understood.

Also, I think what you would see is the trajectory of the acquisitions margins improving. From the time we started discussing at which point in time, it was a negative trajectory by the time we acquired and to where we are today, it has already started contributing into the poster and at activity level as well. And the synergy plan that we have, which basically optimizes cost, which we already spoke about, whether it is technology, real estate, people, shared service functions and so on and so forth. Those plans have been drawn out and have been put in place. So the effect and the impact of all of these, you will start seeing the higher margin contribution. And that obviously will reduce, I guess, the gap between the revenue growth and the EBITDA growth [indiscernible].

Sreekanth, if I may, just one more question at the time of the asset acquisition, I think the broad direction of taking on the margin was that in about 3 to 5 years by the time the transaction closes, the margin would reach somewhere upwards that understanding still stays, right? I think that's not changed over the past couple of quarters.

In fact, when we said what we said, that was obviously is outside in perspective of -- based on the due diligence information, now obviously, we go together. Now we are even more confident than what we said at the point in but we'll try to move the number even beyond that.

The next question is from the line of Uday Pai, from Investec.

Just a couple of things. So we had launched the KRA business last to last quarter or it went live in the last quarter. Any update on that? Also, any update on the Aladin platform integration that we had done? So any color on both the sides is what I was looking for.

I'll take that. So the KRA platform, as you rightly said, went live late Q3, back to early Q4. So obviously, it's in early stages of business growth. We are extremely thrilled that in a very short period of time, we have closed contracts with a little over 45 asset management companies, large brokers and have been chosen by AMP to be the preferred partner in the -- the objective of identifying the uncaged assets that are lying in the country. This is an initiative plan from the finance industry, given there is a significant amount of our money that is held up in unclaimed money. And then we are not able to track and trace. So our technology has been proven to be best in class and hence to be chosen. So you will start seeing the growth in the business from here on. But that said, while our overall contracts have been very strong and is in what we have signed so far. There has also been some industry shifts, I think, which I've already alluded to back in the day where it is possible that the overall KRA revenue itself may have a little bit of impact across the industry. In the context of the initiative that there will be a similar POS point of say, ID that is going to be leveraged for securing and fetching the KYCs, which effectively will then mean that a decent part of KRA revenue, which comes in the form of hedge costs. probably will go away. It is not yet operationalized, but that's under discussion. So I expect, but that happens, obviously, there will be impact on the overall KRA we are not specifically to case it. But if that were not to happen, I guess, we will see a reasonably robust growth into the KRS business in the coming year. As far as Alain, the status has slightly moved ahead from what I've spoken last time, which is about the integration,; right? This is exceptionally complex and a very large integration. We need to bear in mind that we are talking about the world's largest risk management platform on which close to $30 trillion, $40 trillion worth of stages orchestrated. Integration with downstream systems, bear in mind, we are more a unaccounted in this conversation. Our platform is Empower. The trend of this system is Aladin. So that means to be integrated with this and 20s being parted business some life cycle has to kick in to win the clients. So it will take a little bit more time. We need to stay patient. But what we have been gaining through this process is a phenomenal understanding in terms of how large international platforms behave, what goes into it? What drive their growth, what helps them to sell, how do they manage their internal operations and so forth. All of the invaluable experience that can't be quantified in numbers here, but that's something that will definitely reflect in our overall international expansion. But the direct integration as well as into the business development activity should start in a couple of quarters.

Thank you. That was the last question for today. I now hand the conference over to the management for closing comments.

Thank you, everyone, for attending the conference. I just want to reiterate what Sreekanth mentioned that we continue to work towards creating operating leverage. We are taking a hard look at all of our cost and in terms of enablement of whatever investments we have done in technology to leverage that. And working closely with Ascent to gain more market share and create that operating leverage in the international business. You will continue to see quarter-after-quarter the results of our integration with Ascent as they play out in terms of improving both the top line and the bottom line. Thank you so much for attending today.

Thank you.

Thank you very much. On behalf of IIFL Capital Services Limited, that concludes this conference. Thank you all for joining us today, and you may now disconnect your lines.