CAMS IPO

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a) 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 Insurance, Private Equity Funds, Banks, Non-Banking Finance Companies.

b) 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, White Label Call center, Online, Mobile app, and Chatbot Services.

c) 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.

d) CAMS is co-owned by – NSE Investments Limited (Subsidiary of NSE), 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 (a financial services conglomerate) and is headquartered in Chennai, India.

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

Business Model of the Company:

a) They drive revenue from the mutual fund’s services business.

b) 86% of revenue is contributed by fees they take from Mutual funds houses to manage their units and legal and regulatory requirements of SEBI.

c) The fee structure depends upon the size of AUM. The more the AUM, the more will be the revenue.

d) They charge higher fees on Equity Mutual funds than Debt Funds.

Overall we can say the business model is primarily moving around mutual fund AUM. If the market is booming, big positive for CAMS.

Competitors in the market providing the same services:

KFin Tech is the biggest competitor to CAMS in managing mutual fund business for clients.

a) Mutual Funds Services Business: KFin Technologies Private Limited.

b) Electronic Payment Collection Services Business: Indiaideas.com Limited (BillDesk), Ingenico repayments India Private Limited (Tech Process) and Razorpay Software Private Limited

c) Insurance Services Business: NSDL Database Management Limited, Karvy Insurance Repository Services Limited and CDSL Insurance Repository Limited.

d) Alternative Investment Fund Services Business: KFin Technologies Private Limited, Sundaram BNP Fund Services Limited (now acquired by KFin Technologies Private Limited) and IL&FS Securities Services Limited.

e) Banking and Non-Banking Services Business: Karvy Data Management Services Limited, PAMAC Finserve Private Limited and Suma Soft Private Limited.

f) KYC Registration Agency Business: CDSL Ventures Limited, Dotex  international Limited and Karvy Data Management Services Limited.

g) Software Solutions Business: KFin Technologies Private Limited

Objects of the CAMS IPO:

It is a pure OFS wherein the following shareholders are selling shares as indicated against their name. So the company will not get anything in the IPO. (i) GREAT TERRAIN INVESTMENT LTD = 4144600 Equity Shares (ii) NSE INVESTMENTS LIMITED = 6099876 Equity Shares (iii) ACSYS INVESTMENTS PRIVATE LIMITED = 944724 Equity Shares (iv) HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED = 487600 Equity Shares (v) HDB EMPLOYEES WELFARE TRUST = 487600 Equity Shares
DRHP of CAMS IPO
RHP of CAMS IPO

CAMS IPO Details:

Open Date: Sep 21 2020
Close Date: Sep 23 2020
Total Shares: 18,246,600
Face Value: ₹ 10 Per Equity Share
Issue Type: Book Building
Issue Size: 2244 Cr.
Lot Size: 12 Shares
Issue Price: ₹ 1229-1230 Per Equity Share
Listing At: NSE,BSE
Listing Date: Oct 01 2020

Promoters And Management:

Great Terrain is the Promoter of the Company. The Promoter currently holds an aggregate of 21,224,000 Equity Shares, aggregating to 43.50% of the pre-Offer issued, subscribed, and paid-up Equity Share capital of the Company.

Financials of CAMS IPO:

Financials( fig. in Crs)
Year Revenue EBITDA OPM PAT NPM Shares FV EPS
2016 391.00 143.00 36.57% 84.00 21.48% 4.876 10 17
2017 472.00 183.00 38.77% 108.00 22.88% 4.876 10 22
2018 650.00 254.00 39.08% 160.00 24.62% 4.876 10 33
2019 711.00 261.00 36.8% 130.00 18.28% 4.876 10 26
2020 721.00 309.00 42% 173.00 23% 4.876 10 35
IZ View 1. The revenue growth in the last 3 years is timid. The reason being the slowdown in the market, and economy post-2018. The current bull market is positive for the stock. 2. The company has an asset-light business model which shows in the excellent EBITDA and PAT margins. 3. The company has negligible debts on the book. 4. They have not diluted equity in the last 4 years. The book value per share based on FY20 numbers is 108 per share. 5. P/E = 35x 6. Mcap = 6000 Crores. So, Mcap/Revenue = 8.31x.

Comparison With Peers:

There are no listed peer in the market.

Recommendation on CAMS IPO:

Review and Recommendation of InvestorZone are 5/10. Pros: 1. Asset Light business model. In the buffet language, it is a cash-cow business. This means without putting incremental capital, this will keep generating higher ROCE as the revenue grows. As of 31.03.2020, the ROCE stands at 40%. Anything above 30% is great. 2. The competition is less. The only big player is Karvy. The complex Indian regulations to handle for clients are moat for the CAMS business. 3. Pricing is moderate. Room for listing gain. Cons: 1. The promoters selling shares partially is sometimes consider negative. 2. Revenue growth is not that Wow! in the last 3 years. 3. 86% of the business dependent on Mutual Funds. We know in the past decade, the fees Mutual fund charges from clients i.e ER(Expense Ratio), are kept on reducing. In nutshell, the profitability of Mutual funds is reducing. So, if Mutual fund companies won't able to grow their AUMs, the CAMS business will suffer.

Lead Manager of CAMS IPO:

  1. HDFC Bank Limited
  2. ICICI Securities Limited
  3. Kotak Mahindra Capital Company Limited
  4. Nomura Financial Advisory And Securities (India) Private Limited

Registrar of CAMS IPO:

  1. Link Intime India Private Limited

Discussion on CAMS IPO:

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