However, experts said diversification into new areas like alternative investment funds (AIFs) administration, the National Pension Scheme (NPS), and global fund administration may provide the next leg of growth.
Since 1 January, shares of registrars and transfer agents (RTAs) like KFin Technologies Ltd (KFin) and Computer Age Management Services Ltd (Cams) have dropped 28% and 24%, respectively.
Consolidated revenue from operations for KFin fell 3.1% quarter-on-quarter (q-o-q) in Q1 FY26, while its consolidated profit after tax (PAT) fell 9% q-o-q in the same period. In the case of Cams, its consolidated revenue from operations fell 0.5% and PAT fell 4.2% on a q-o-q basis in Q1 FY26.
For Cams, certain bigger AMCs with larger assets under management (AUM) re-priced their contracts, resulting in lower fees for the RTA, said experts. Asset managers with bigger AUMs have significant bargaining power, so they can push for cheaper services from the RTA, especially since they handle large volumes of transactions.
As a result, the revenue yield for Cams was 5% lower sequentially due to the contract renegotiation, said Yes Securities in a 31 July report. However, the repricing of the large contract is 90-95% complete, and there is nothing more on the horizon as far as large account renegotiation is concerned, the report added.
Fall in yield
Yes Securities said that for Cams, there will be a 3-3.5% yield depletion per annum for about two years on account of telescopic pricing and nothing much beyond that. Telescopic pricing means charging different rates based on the AUM, so a larger AUM gets lower fees for the RTAs.
Ram Charan Sesharaman, Cams’s chief financial officer, said, “After the decline in revenue yields for two quarters, such a decline in revenue won’t happen in the foreseeable future. Plus, regarding yield compression and telescopic pricing, the bigger customer resets have been renewed in the last 6-12 months, so we do not expect surprises.”
On the other hand, KFin has faced pressure from telescopic pricing structures and selective discounts offered to AMCs, which scaled faster, said Shrikant Chouhan, head of Equity Research at Kotak Securities.
Moreover, KFin and Cams also remain heavily dependent on the mutual fund industry, so any moderation in MF flows directly impacts revenue growth, said Chouhan.
Vivek Mathur, chief financial officer of KFin Technologies, said 65% of the company’s consolidated revenue is linked to mutual fund Average Assets Under Management (AAUM), and within that, 60% is equity AAUM-linked fee, making only 40% of the overall revenue dependent on equity market movement.
Equity AAUM has two elements that drive growth—inflows and mark-to-market. “While inflows have been fairly strong and consistent, driven by strong retail participation via the systematic investment route, mark-to-market has been fairly volatile over the last 12 months, led by several global factors. Being a technology-first company, we are continuously investing in innovation and building purpose-fit industry-first initiatives, which are helping us to continuously reduce our dependence on equity market movement-linked fee income within our domestic mutual fund business,” Mathur added.
Experts say increased costs have put more pressure on profits. Although higher transaction volumes and increased retail penetration in mutual funds and equities drove revenue growth for the RTAs, rising operating costs, including employee expenses and technology upgrades, constrained profitability, said Vinit Bolinjkar, head of research at Ventura Securities.
Operating expenses for KFin Technologies increased 16.2% y-o-y in Q1 FY25, while they increased 14.2% y-o-y for Cams in the same period.
What’s next?
Both RTAs are diversifying into non-mutual fund RTA-related businesses, which may help them grow further, said experts. The diversification becomes necessary as AUM for the mutual fund industry will grow, kicking in telescopic pricing and hence reducing revenues for RTAs.
Revenues from non-MF business currently account for 13% of Cams’ total revenues, while the same number for KFin is 26%, as per the companies’ investor presentations.
“KFin’s diversification into the Alternative Investment Fund (AIF), National Pension System. (NPS), and global fund administration, growing at a 32% compound annual growth rate (CAGR), will reduce the reliance on domestic MF RTA and support long-term growth,” said Anand Rathi Research in a report dated.
KFin’s Mathur said that the company plans to increase its revenues from non-mutual fund business to 40-50% over the next five years. He added that the company’s younger businesses like international fund administration, AIF, Private Wealth Management (PWM), Portfolio Management Services (PMS) solutions, and NPS solutions are growing faster than the traditional businesses and gaining significant market share.
While the report states that Cams is expanding into AIF, repository, payments, etc. These adjacent verticals leverage its tech infrastructure and regulatory expertise, positioning it well for long-term growth while reducing dependence on mutual fund revenue, it added.
In March, KFin had a 36.8% market share in the alternative space in India. It has serviced 592 funds with an average AUM of ₹1.6 trillion as of July end. The company was servicing 411 funds three years ago.
New business
For Cams, the company had assets under service of ₹2.7 trillion on the alternatives side as of Q1 FY26. It has a 50% market share of the outsourced AIF market in India. Cams does not give data on the funds it services.
Sesharaman from Cams said, “They (Cams) have entered the analytics space, which will become a significant part of our revenue, while the core revenue stream will remain the AUM-based pricing for RTA services and payment aggregation.”
Also, GIFT City has strong potential for domestic RTAs, say experts. “As retail mutual fund schemes expand in GIFT City, existing RTAs like Cams and KFin will be integral to operationalizing these schemes, offering high-value services like onboarding, settlement, compliance, and others,” Bolinjkar added.
“We have won many mandates and are already on a profitable trajectory and expect significant growth over time despite a slow initial ramp-up in GIFT City,” Sesharaman added.
Valuations
Experts, however, argue that valuations for both companies appear high at this point. Srikant Chouhan, head of equities at Kotak Securities, said that KFin appears better placed for medium-term earnings growth given its diversified model and inorganic expansion opportunities, but at about 55x 1Y forward P/E, valuations look demanding, especially considering execution risks in international markets.
He added that Cams trades at about 40x 1Y forward P/E, a 20% premium to AMCs, even with growth still tightly linked to MF AUM.
Bolinjkar said that the companies’ expanding client bases and robust pipelines of revenue-generating opportunities give confidence in their long-term growth trajectory.
He added that as both companies continue to scale their operations and benefit from higher transaction volumes and a growing retail base, they are expected to return to solid earnings growth in the coming quarters. Hence, the premium valuations are likely to persist, with the stock prices expected to recover as earnings pick up.
Key Takeaways
- Cams and KFin stocks have dropped over 24% YTD due to pricing pressure and rising costs.
- Large AMCs are renegotiating contracts, leading to lower revenue yields for RTAs.
- Telescopic pricing models are compressing margins as AUM grows.
- Diversification into AIFs, NPS, and global fund services is underway to offset MF dependence.
- Despite earnings pressure, valuations remain high, supported by long-term growth expectations.
