Kotak Bank Buys 10% Stake in Mutual Fund Registrar, KFIN Technologies
It looks like Kotak Bank is on an inorganic growth spree. Just a week back, Kotak Bank had picked up the vehicle financing business of Volkswagen Finance. On 20th September, Kotak Bank announced another acquisition of stake in Hyderabad based KFIN Technologies. Kotak Bank will buy a total of 1,67,25,100 crore shares of KFIN Technologies at an average price of around Rs.185.35 per share. The total consideration paid is Rs.310 crore in cash.
This purchase will give Kotak Bank ownership of 9.98% in KFIN Technologies. KFIN Technologies was formerly called Karvy Computer share and has a major ownership by General Atlantic Partners. However, post the Karvy Group being banned from the capital markets due to the scam surrounding the sale of client shares, the global partners insisted on a change of name to highlight its independent arms-length ownership.
KFIN Technologies is one of India’s leading registrars and transfer agents for corporates, mutual funds, alternative investment funds (AIF), ETFs, insurance and pensions. KFIN is registrar to 25 out of the 44 AMCs in India, although in terms of AUM, listed entity CAMS is much bigger. It also provides central record-keeping for the National Pension System (NPS). KFIN has 13 crore folios in total, holds Rs.11 trillion in assets under custody and processes nearly 1 million transactions per day.
For Kotak Bank, this is in line with their policy of making focused minority investments in niche companies in the financial sector. Kotak will also look to leverage on the deep client entrenchment of KFIN as well as its fine-tuned processes and systems over last 30 years. For KFIN, the association gives them the backing of a much larger balance sheet. However, the deal is subject to regulatory approvals.
Interestingly, while KFIN Technologies is the registrar for the shares of Kotak Mahindra Bank, the official registrar for Kotak Mutual Fund is CAMS. It remains to be seen if the regulator is OK with a bank and a mutual fund owning a stake in a registrar.
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