Introduction
KFin Tech today was known as Karvy Fintech before. Until 2019, it was a force to reckon with in the Indian securities market. It was in every vertical of the Indian securities market, from retail stock broking, depository participant services, portfolio management, mutual fund distribution, commodities trading, share transfer activities, and central record keeping for companies and mutual fund houses to IPO services.
However, a fraud in one of its subsidiaries, Karvy Stock Broking Limited (KSBL), led to the company’s collapse, which we will discuss in the final section of this article. Let’s examine the company’s history and understand its transition to KFin Technologies.
What is Karvy?
Established in 1983 in Hyderabad by a group of chartered accountant friends, C Parthasarathy, M Yugandhar, and MS Ramakrishna. They started with a capital base of ₹1.5 lakh and were initially involved in offering auditing and taxation services.
Over the years, they expanded their services through several group companies, including Karvy Stock Broking Limited (KSBL), Computershare, and Global Services. They developed core competency in transaction processing and recording through technology.
However, after the scam in KSBL, it had to close down a significant portion of its businesses due to the cancellation of registrations, and investor confidence was also severely affected.
What is KFin Tech?
It operates as a Registrar and Transfer Agent for mutual funds and a Central Record Keeping Agency for the NPS.
In November 2018, General Atlantic, a private-equity fund, acquired an 83.5% stake in the company and distanced itself from the Group. Following regulatory actions against the Group of companies, General Atlantic rebranded the company and named it KFin Technologies.
What Does KFin Tech Do?
KFin Technologies is a leading provider of investor and issuer services for the asset management industry and Indian corporations.
The company plays a vital role in the financial ecosystem, offering registrar services to 27/46 Indian mutual fund companies. Additionally, it caters to nearly 600 listed and 3000+ unlisted companies, serving as a key player in providing central record-keeping services for the National Pension Scheme.
It also handles over 300 AIF schemes launched by 100+ fund managers, showcasing its extensive reach and impact in the industry. It is a preferred platform for 23 mutual funds and pension manager clients in Malaysia.
The company stands out by providing a comprehensive suite of services, including SaaS-based end-to-end transaction management, channel management, compliance solutions, data analytics, and various other digital services. These offerings empower asset managers across different segments to streamline operations and enhance efficiency. Furthermore, the company offers outsourcing services for global players, expanding its reach beyond the Indian market.
With its diverse range of services and digital solutions, the company remains a trusted partner for asset managers, facilitating smooth investor interactions, ensuring compliance, and driving operational excellence.
What Happened in Karvy Stock Broking Limited Scam?
The scam involved the misuse of client securities (shares) lying in their demat account by pledging them for loans to raise funds from multiple banks without the knowledge or consent of clients.
These funds were then diverted to other group companies, namely Karvy Realty. A SEBI investigation found that the company diverted clients’ securities worth around ₹2,300 crores for its own purposes, and more than 95,000 investors were affected.
The company was found to be violating multiple regulations, including client protection, fund management, and reporting requirement, and also failed to maintain proper books of accounts.
Consequently, in November 2019, SEBI barred it from signing new clients and canceled the registration of the brokerage firm. In November 2020, it was expelled from NSE and BSE as a trading partner and declared defaulter.
After the scam, the company shut down some of its business units and reduced operations. SEBI banned its promoters from the market for seven years through an order issued on April 18th, 2023.
FAQs
Are KFin Tech same as Karvy?
Yes, the company was previously known as Karvy Fintech. In November 2018, private-equity fund General Atlantic acquired an 83.5% stake in the company. After the scam was discovered in its Stock Broking subsidiary General Atlantic renamed it KFin Tech, disassociating from the scam-ridden brand.
What does KFin Technologies do?
It is a leading technology-driven financial services platform that provides investor and issuer services to asset management companies and Indian corporates. Currently, it offers registrar services to 27 out of 46 Indian asset management companies, nearly 600 listed and 3000+ unlisted companies, and serves as a key player in providing central record-keeping services for the National Pension Scheme.
Does Karvy still exist?
SEBI canceled the registration of Karvy Stock Broking Limited in November 2019, resulting in not being able to conduct its business operations. Their management has shut down or reduced the size of other group companies.
Read more: How Long-term investing helps create life-changing wealth – TOI.