CEO Sreekanth Nadella told CNBC-TV18 that the company’s business tends to ramp up after Q1 and remains confident about the rest of the financial year. “In financial services, especially in our segment, Q2, Q3, and Q4 are typically much stronger in terms of growth compared to Q1,” he said.
The company’s Q1 FY26 revenue fell 3% sequentially to ₹274 crore, while net profit dropped 9% to ₹77.2 crore. Margins also slipped to 41.5% from 43.25% in the previous quarter.
Despite this, KFin’s domestic mutual fund business grew 3% sequentially. Nadella acknowledged that mutual fund revenue yields have declined both sequentially and year-on-year but attributed this to natural market moderation and volume-driven pricing. “After a 32% growth year, it’s only natural to see a moderation to around 20%. You can’t expect 30%-plus growth every year,” he said. He added that offering discounts to high-volume clients is a strategic move to help them grow faster, which ultimately benefits KFin.
On the inorganic growth front, Nadella said the company is in the final stages of completing its $150 million acquisition of Ascent Fund Services. While all Indian regulatory approvals have been secured, final clearances from international regulators are expected in four to six weeks. “Once that happens, integration will be completed,” he said.
Ascent, which operates in 18 countries, is expected to contribute over $20 million in annualised revenue. Post-integration, KFin’s mutual fund segment is expected to account for about 50% of total revenue, down from 60%, while the international business will rise to roughly 25%.
Nadella reiterated the company’s broader vision of building “the first large global fund administrator based out of India.” The company is already expanding organically in five key Asian markets—Malaysia, Philippines, Hong Kong, Singapore, and Thailand.
He added that KFin is currently the number one or two player across all business lines and aims to be the leader in every segment. “Our goal is to become the number one in all business lines where we’re currently number two,” he said.
Below is the verbatim transcript of the interview.
Q: It’s the second consecutive quarter of revenue decline, driven by issuer solutions, international, and other investor solutions. The domestic MF business has grown 3% sequentially. What’s the outlook going forward? Do you maintain your earlier guidance of 18–20% growth in FY26?
Nadella: Our line of business always tracks year-on-year growth, not so much quarter-on-quarter. In financial services, especially in our segment, Q2, Q3, and Q4 are typically much stronger in terms of growth compared to Q1. So, considering the headwinds in the market, we’ve still seen good growth. In April, markets picked up again. Overall revenue growth of over 15.5% and PAT growth of over 13.5% are good indicators of a strong season ahead.
If you look at FY24 and FY25, the trend is fairly similar. Q1 usually starts with margin close to 30% EBITDA—around 41 to 42%—which typically improves and ends up around 43 to 45%. That’s very much in line with the guidance we have given.
Q: So, you’re sticking to your revenue guidance of 18–20%?
Nadella: Yes.
Q: The other thing we want to understand is regarding mutual fund revenue yields. These have dipped both sequentially and year-on-year. What’s the reason for that, and can they move up in the coming quarters?
Nadella: Mutual fund yields are influenced by industry growth. If you recall, the previous year saw overall industry growth of over 30–33%, and we grew in line with that. But we always evaluate growth from a longer-term perspective, averaging over several years rather than just one. The average tends to stabilise around 20% annually. So, after a 32% growth year, it’s only natural to see a moderation to around 20%. You can’t expect 30%-plus growth every year.
The yield is also impacted by telescopic pricing—similar to other businesses, where higher volumes lead to discounts passed back to clients. We are mindful of helping our clients grow faster than the industry, and in that context, offering discounts helps them improve market position, which eventually benefits us too.
Q: You’re also awaiting regulatory approvals for the integration with Ascent Fund Services. When is that expected, and what will be the impact on your P&L once the approval comes through?
Nadella: About five weeks ago, we completed the transaction with Ascent Fund Services—a $150 million deal to be executed over five years. We’ve acquired a majority stake and already received all required regulatory approvals in India, including SEBI, PFRDA, and RBI.
However, Ascent is a global company with operations in 18 countries, so additional approvals are needed from other regulators, particularly in three countries in the Middle East. We expect those to come through in the next four to six weeks. Once that happens, integration will be completed.
In terms of P&L impact, Ascent is a young, fast-growing organisation, with a top-line growth of about 35% year-on-year. The annualised revenue addition would be roughly $20 million or more, depending on when integration is finalised.
Q: Going forward, will higher growth come at the cost of margin pressure? And what market share are you aiming to maintain, especially with strong growth outside India?
Nadella: We look at market share differently across our business lines. Mutual funds are our largest segment, currently contributing about 60% of our business. Post integration, this will reduce to around 50%. The international business will then account for roughly 25%. Issuer solutions—primarily focused on IPO and secondary market services—make up about 15%, with the rest coming from alternatives, pensions, and private retirement schemes.
Across all our segments, we are either the number one or number two player. Our goal is to become the number one in all business lines where we’re currently number two.
Broadly, our objective is to build the first large global fund administrator based out of India. That’s our five-year vision. The Ascent acquisition and our organic expansion into five countries—Malaysia, Philippines, Hong Kong, Singapore, and Thailand—give us the tailwind we need to achieve this goal.
As for market share, it will depend on the geography we enter. We will build and scale market share accordingly.
