CAMS IPO analysis!
Last updated: 20 Sep, 2020 | 02:21 pm
CAMS (Computer Age Management Services) is set to raise up to ₹2,242 crore via IPO which opens on 21st September, Monday. Here are the details.
- CAMS is India’s largest registrar and transfer agent (RTA) of mutual funds, with an aggregate market share of 70% based on mutual fund average assets under management.
- The RTAs offers services such as transaction execution, payment, settlement and reconciliation, dividend processing, investor interface, record keeping, report generation, brokerage computation and compliance-related services.
- The company’s MF clients include four of the five largest mutual funds and as well nine of the 15 largest mutual funds based on AAUM during July 2020. As at the end of July-20, CAMS managed ₹19.20 lakh crore worth of AAUM.
CAMS operates in a 4-player market with a 70% market shares. There are three other registrar and transfer agents in the country Karvy with 27% Market share, and Franklin Templeton Asset management with 3% share, and Sundaram BNP Paribas with a market share of just 2%.
CAMS revenue break-up
- Overall, revenues from the MF business stood at 86.9% in FY20 while non-MF businesses accounted for 13.1 per cent of the total for CAMS. “The top 5 Mutual Fund clients of CAMS accounted for 68% of revenues in FY20 for CAMS”
- RTAs generate revenues on the basis of AUMs handled by them across various categories – (equity, debt, liquid, hybrid and others). Equity funds (0.06% of AUM) attract the highest fees and passively managed ETFs and index funds the least (0.015% of AUM).
- CAMS generates nearly 80% of its revenues from data processing. The overall revenues for FY20 increased by 1% to ₹700 crore, according to its DHRP.
- “CAMS has seen a healthy rise in Operating Profits (23% YoY) and Net Profits (33% YoY) in FY20. The operating profit margin stands at a healthy 34% in FY20.”
- Net profit margin for the year stood at 25%, the average margins for the last 4 years stood at 23%.
- Notably, CAMS has generated positive free cash flows (FCF) in the last four years. The company has a healthy dividend payout policy as it is debt-free.
About the issue
- Issue details
- Issue open: 21 Sep - 24 Sep 2020
- Price band ₹1,229-₹1,230
- Issue Size : 1.82 crore shares sold by NSE investments.
- Issue Size : ₹2,244 crore
- Reservation for QIB - 50% , Retail -35%, Non institutional Investors -15%. Employees: 1.82 lakh shares
- Bid lot: 12 shares. Retail investors can bid a maximum of 13 lots
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CAMS enjoys a 70% market share in a market with high entry barriers, giving it a valuable moat. It has also delivered strong margins and returns consistently, with negative working capital. Given factors such as healthy free-cash flows, debt-free status, strong return ratios, healthy operating margins and no listed peers, we remain positive on the prospects of the issue.