Past link haunts General Atlantic-backed KFin Tech; it goes for a makeover

The Rs 2,300-crore Karvy Stock Broking scandal threatened to destabilise operations at General Atlantic-backed KFin Technologies (KFin Tech), a registrar and transfer agent (RTA) for initial public offerings (IPOs) and mutual funds. However, the company says “it’s business as usual” as it has managed to reach out to all its clients explaining its lack of association with Karvy.

Sources said several companies —including Ujjivan Small Finance Bank — which had selected KFin (formerly known as Karvy Fintech) as registrar for their IPOs had threatened to drop the company to avoid negative investor sentiment towards the Karvy brand. Most of these companies decided to continue after officials from the US-based private equity (PE) major, General Atlantic, convinced the clients that KFin was no longer part of Karvy Group, said people in the know.

Similarly, MF industry players, which had empanelled KFin as their RTA, too, had expressed concerns over its operations following the Securities and Exchange Board of India (Sebi)’s order against Karvy Stock Broking on November 22.

Paytm Money, a mutual fund distribution platform, had to issue a public statement to assuage investor concerns. “Following the news of a Sebi ban on Karvy Broking, we noticed concerns from some users who have made investments in fund houses that are serviced by Karvy Fintech RTA. These two entities were earlier part of Karvy Group, but Karvy Fintech RTA now operates as a different entity with completely different management and ownership structure from Karvy Group,” PayTM Money said in a statement to investors.

Industry players say thanks to the strong market standing of General Atlantic, which has investments in close to a dozen Indian companies, including unicorns like Byju’s, KFin managed to limit damage from the Karvy debacle.

“It is business as usual for us. We do not anticipate any impact on our business. In fact, we have added new clients across business verticals. Ujjivan Small Finance Bank IPO is an example. We are the RTA, and this IPO has attracted the best investor response thus far this year, both in terms of issue being over-subscribed and also in the number of IPO applications received,” said V. Ganesh, CEO, KFin.

An RTA is tasked with the allotment and record-keeping of shares and units to investors. Also, it processes dividends to shareholders. Besides KFin, Link Intime, backed by Australian firm Link Market, is a major player in this space.

Since Sebi’s order against Karvy, two companies have filed their draft IPO documents, of which SBI Cards opted for Link Intime as its registrar, while Home First Finance went with KFin.
 

“Our clients have a full grasp that KFin Tech is neither a group nor an associate company of Karvy. We continue to work with our clients, investors, and other stakeholders to counter all false allegations strongly,” said Ganesh.

General Atlantic had acquired over 80 per cent stake in KFin in November 2018. The US-based PE firm has embarked on a rebranding exercise, which included the recent name change of name from Karvy Fintech to KFin Technologies.

KFin said the company never had Karvy representatives in the management and it no longer has a Karvy representative on its board. 

“Post the majority transaction, General Atlantic was clear that there will be a transition from the Karvy brand within a defined period, and this has led to the rebranding,” said Ganesh.