FREE Account Opening + Zero AMC Fees* + MutualFund SIP1
Loading...
CAMS IPO  Fundamental Analysis

CAMS IPO Strengths

  • CAMS has the highest AUM serviced, which is approximately 70% of the market share as of July 2020.
  • Robust operating and net margins over the last three years.
  • No listed competitor.

CAMS IPO Challenges

  • K Fintech Pvt. Ltd (27% market share in July 20) is emerging as the key competitor for CAMS.
  • Dependency on Mutual Fund Business.

CAMS IPO Overview

Cams is coming up with issue of 18,246,600 equity shares of face value of Rs 10 each amounting to Rs 2244 crore. It would be listed on BSE only. IPO comprises of

  • Offer for sale (OFS) of 18,246,600 equity shares amounting to Rs 2244 crore.

It is a pure OFS wherein the following shareholders are selling shares so the company will not get anything in the IPO.

NSE intends to divest its entire shareholding, held through NSE Investments, in the Company by way of sale and transfer of (i) 18,246,600 Equity Shares pursuant to the Offer; and (ii) the balance 38,400 Equity Shares at a price of Rs. 1,230 per Equity Share pursuant to the NSE Investments SPA.

The offer includes a reservation of 182500 equity shares to eligible employees at a discount of Rs 122 per share.

    Issue open date: 21st Sept. 2020

    Issue close date: 23rd Sept. 2020

    Price band: Rs 1229-RS 1230 per share

About the company

  • CAMS, incorporated in 1988, Tamil Nadu; is India’s largest registrar and transfer agent of mutual funds with an aggregate market share of approximately 70% based on mutual fund average assets under management (“AAUM”) managed by its clients and serviced by CAMS during July 2020, as per CRISIL Report.
  • Provides a comprehensive portfolio of technologybased services, such as transaction origination interface, transaction execution, payment, settlement and reconciliation, dividend processing, investor interface, record keeping, report generation, intermediary empanelment and brokerage computation and compliance related services, through our pan-India network to our mutual fund clients, distributors and investors. It includes the following business:
  • Electronic payment collections services business- manage mandated transactions, including registering of mandates, initiation of collections, reconciliation and the related reporting services for mutual funds, non-banking finance companies and banks.
  • Insurance services business- Processing of new business applications, holding policies in dematerialized form, servicing policies and other support functions to insurance companies.
  • Investment funds services business- Provide services to investors, manage records and perform fund accounting and reporting, among other services, for alternative investment and other types of funds.
  • Banking and non-banking services business - Digitization of account opening, facilitation of loan processing and back-office processing services to banking and non-banking financial institutions.
  • KYC registration agency business- Verify and maintain KYC records of investors for use by financial institutions.
  • Software solutions business- develops software for our mutual funds services business and for mutual fund companies.

Financial Review/Financial Performance

Total revenue for FY 20has increased to Rs 721 crore from Rs711 crore in FY19. Revenue growth has remained timid during the last three years. Asset light business model has resulted in excellent margins and EBITDA. PAT has increased by 32% in FY20 due to reduction in expenses by 7%. CAMS have robust operating and net margins of 43% and 24% in FY20 respectively and they have been consistent in the last three years. CAMShas low leverage; debt to equity remaining below 0.30 for the last three years.

Quarterly performance for the Q1FY21 has also remained strong though revenues have fallen by 11% as compared to Q1FY20. Reduction in revenues is seen due to decline in the AAUM of equity oriented schemes managed by CAMS clients, which adversely affected revenue from operations. The COVID-19 pandemic resulted in a significant decline and volatility in the Indian equity markets, which caused investors to avoid higher risk assets such as equity funds and reduce their investments in such funds through withdrawals or fund exits and consequently reduce the AAUM managed by the clients.

Table 1 - Financials and Ratios (Amount in Rs Crore)
Title FY2020 FY2019 FY2018
Total Revenue 721.34 711.81 657.82
PAT 172.44 130.31 146.82
EBITDA 308.99 261.74 274.72
Total Accets 802.53 736.32 697.85
Gross profit margin(%) 42.84% 36.77% 41.76%
Net profit margin(%) 23.91% 18.31% 22.32%

Conclusion

The Issue is priced at P/E of 34.61 and P/B of 11.1 basis FY20 earnings.As such no average industry P/E or P/Bare available for comparison. Based on P/E and P/BV parameters, the issue appears to be fully priced.CAMS is well established in its business and control a major share, there are no listed peers but KFin Tech is the biggest competitor to CAMS in managing mutual fund business for clients.Since it is the first to be listed in this business sector and basis impressive client base, CAMS would attract good interest from Investors. Issue might draw listing gains and shall also give good returns in long-run. Hence, investors may subscribe for long term.

Reviewer recommends Subscribe to the issue.

Review By CA Priyanka Choudhary on

Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.



User Reviews