Everything you need to know about the CAMS IPO

Computer Age Management Services (CAMS) Ltd is a technology-driven financial infrastructure and service provider for mutual funds and other financial institutions. It is India’s largest registrar and transfer (RTA) agent for mutual funds. As per a Crisil report dated Nov 2019, it has a 69.4% mutual fund aggregate market share.

The Warburg Pincus-backed company is looking to raise Rs 2,244 crore through an Initial Public Offering (IPO) opening for subscription on Monday. The price band has been set at Rs 1,229-1,230 and the offer will see the sale of 1,82 crore equity shares, equaling 37.4% stake held by NSE Investments, a subsidiary of the National Stock Exchange. The issue will close on September 23rd, 2020. If you are thinking, why is NSE is offloading its stake in CAMS? The reason is that it received a directive from Sebi in February this year to divest its stake in CAMS. Hence, this IPO issue is actually an offer for sale (OFS) of 1.82 crore shares.

CAMS takes care of the entire back-end work of its mutual fund clients, right from account creation and transaction origination to processing payments, transaction execution, dividend processing, intermediary empanelment, report generation, investor interface, settlement and reconciliation, compliance-related services, and brokerage computation. For all these services, CAMS charges a fee of 0.036% (FY20) on AUM managed by its clients, which are essentially Asset Management Companies (AMCs).

The company provides services in the area of electronic payment collections services business, insurance services business, alternative investment funds services business, banking, and non- banking services business, KYC registration agency business, and software solutions business. CAMS has a pan-India network with over 278 service centers spread across 25 states and five union territories.

Click here to apply for CAMS IPO.

About the Company

• CAMS has been a part of the Indian Financial services segment for over two decades and has built a good reputation as Registrar and Transfer Agency to the Asset Management Industry of India and as a technology-enabled service solutions partner to private life isurance, private equity funds, banks, non-banking finance companies.

• Besides serving as a B2B solutions partner, CAMS brings the ability of a B2C to serve the end customers through a variety of touchpoints such as a pan India network of service centers, a white label call center, online, and a mobile app.

• CAMS has three back-office delivery centers in Chennai and one BCP site at Coimbatore, about 500 km from Chennai, and a pan-India network of 278 customer service centers. The front, middle and back offices are powered by a talent pool of 4,314 permanent resources as of 30th Sept 2019.

• As on 30th Jun 2020, CAMS’s average service AUM was Rs.17.4 trillion, of which 33% was equity oriented (increased from 27% in FY15) while the rest was non-equity.

• In FY20, CAMS generated 87% of the revenue from the mutual fund services business and in Q1 of FY21, CAMS reported a profit of ₹40.8 crore on revenue of ₹163.46 crore. Its profit and revenue for FY20 stood at Rs 173.45 crore and Rs 721.34 crore respectively.

• CAMS is co-owned by NSE Investments Limited, Warburg Pincus LLC (a leading global private equity firm), Faering Capital (a leading Indian mid-market private equity firm), ACSYS Investments Pvt Ltd, and HDFC Group and is headquartered in Chennai, India.

• CAMS is a professionally managed, institutionally owned, SEBI regulated entity engaged as an IT-enabled service solution partner to BFSI players in India.

Competitive Strengths

• CAMS is India’s largest RTA of mutual funds with an aggregate market share of ~ 70% based on mutual fund AUM managed as of Nov 2019.
• It holds a dominant market share in a duopoly market (its only other competitor being Karvy).
• It is one of the oldest players in the industry and has a long existence since 1988. It has an experienced management and is backed by marquee shareholders.
• CAMS is a zero-debt company with a comfortable cash position.
• It has a diverse portfolio of technology-enabled services.
• Given CAMS strong hold on the MF servicing business and a proven track record, there is a very low risk of competition and hence a high barrier entry that will keep its position intact.

IPO Snapshot

• Price band: Rs 1,229 – Rs 1,230 per share
• Issue size: Rs 2,244 crore
• Number of shares on offer: 1,82,46,600
• Issue subscription date: 21-23 Sept, 2020
• Minimum investment: Rs 14,760 (bid lot size of 12 shares)
• Face value: Rs 10
• Listing on: BSE only
• Listing date: ~ October 1st, 2020
• Book running lead managers: Kotak Mahindra Capital Company Ltd., HDFC Bank Ltd., ICICI Securities Ltd., and Nomura Financial Advisory and Securities (India) Private Ltd.

Should you invest in CAMS IPO?

We recommend a SUBSCRIBE to CAMS IPO, considering its dominant market position in a growing industry (it owns ~70% market share),  its asset-light model, a very high entry barrier, zero debt, healthy cash position, and high return ratios.

Apply For CAMS IPO: Click here