Private equity firm General Atlantic will sell some of the shares that it holds in Karvy Fintech in the company’s upcoming share buyback, two people aware of the development said.
Karvy Fintech offers end-to-end services to investors and distributors of mutual funds. It also provides corporate registry services, back-office operations and data processing services, besides being a central record-keeping agency under the National Pension System.
In November 2018, General Atlantic had invested a little over ₹1,000 crore to acquire a majority stake in Karvy from existing investors and for fresh capital infusion. It currently holds a 83.25% stake in the company.
“Karvy’s board has recently approved a buyback of shares comprising 9-10% of the equity shares. GA will also be tendering its shares along with other shareholders, in proportion to their existing shareholding in the company,” the first of the two people said.
The total buyback size is expected to be around ₹111 crore, which would mean that GA will sell shares worth around ₹92 crore in the buyback, he added.
A Karvy exchange filing said the company’s board has approved the buyback of shares at ₹74.25 per equity share for an aggregate consideration not exceeding Rs.111.28 crore.
“The company has a strong liquidity position, which is in excess of its near-term needs. The idea is to return some of the excess cash to shareholders via the buyback. The buy-back price is almost the same as the price at which General Atlantic had bought the majority stake in Karvy Fintech,” the second person said.
General Atlantic declined to comment.
In a recent interaction with Mint, the Karvy Fintech senior management had said it was looking to diversify into new businesses, as well as expand its presence in South-East Asian countries, including Malaysia, the Maldives, Philippines and Thailand.
“While mutual funds will remain one of the important components of the business, there will be several other components such as global business and global fund services and back-office services for pension funds, private retirement schemes and employee provident funds, which will also form a significant share of our sales,” Ganesh V., managing director and chief executive, Karvy Fintech, had said.
Karvy is also working on insurance services and the alternate funds space. While the share of mutual funds transfer agency business has fallen from 72% in 2017-18 to 60% in fiscal 2019, sales at ₹441 crore have more than doubled in the past five years. Karvy Fintech’s international business comprised about 15% of its revenue in fiscal 2019.
Source: Mint