About the company
Computer Age Management Services (CAMS) is a Mutual Fund Transfer Agency which has been a part of the Indian Financial services segment for over two decades. The company was founded in 1988. NSE Investments Limited, HDFC Bank group, Warburg Pincus LLC and Acsys Investments Private Limited are the owners of Computer Age Management Services.
Today, the CAMS serves as India’s largest registrar and transfer agent of mutual funds. It acts as a technology-enabled service solutions partner (investor interface, dividend processing, brokerage computation, etc.) to Private Equity Funds, Banks, Private Life Insurance, etc. It has 278 customer service centres all over India and has three back-office delivery centres in Chennai. According to CRISIL (Indian rating agency), Based on average assets under management (AAUM), CAMS has an aggregate market share of 70%, which is huge.
CAMS drive a major chunk of its revenue from the mutual fund’s services business. Almost 87% of revenue is contributed by fees they take from Mutual Fund houses. Rest 13% comes from other business. These are non-Mutual-Fund business like verification and maintenance of the KYC records of investors for use by finance institutions. CAMS charges fees based on the size of Asset Under Management (AUM). Higher the AUM, higher the fees. They also follow the policy to charge higher fees on Equity Mutual funds when compared to Debt Funds.
NSE Investments Limited (NSEIL) holds 37.48% stake in CAMS. They are looking to liquidate their stake via an Offer-for-sale.
One market lot consists of 12 shares. For retail investors, the minimum lot is 1 and the maximum lot is 13. That means a retail investor cannot invest more than Rs 1,91,880 (13 Lots X 12 Shares). The tentative date for IPO’s listing date is 1st October 2020.
The highlights about the IPO is given below:
|IPO Date||Sep 21, 2020 – Sep 23, 2020|
|Issue Type||Book Built Issue IPO|
|Issue Size||Rs 2244 crore|
|Offer for Sale||18,246,600 Equity Shares|
|Face Value||Rs 10|
|IPO Price||Rs 1229 – Rs 1230 per share|
|Market Lot||12 Shares|
|Min Order Quantity||12 Shares|
|Employee Discount||Rs 122|
CAMS’ revenue has increased by a CAGR of 13% from 2016 to 2020. Their Profit after Tax (PAT) has increased by CAGR of 15.2% during the same period. Revenue of the company has seen consistent growth. As the Indian Mutual Funds industry expands in the future, more revenue will be generated by the company.
Over the span of 5 years, companies AUM has increased from Rs 13,50,000 crore to Rs 27,00,000 crore. Return on Equity (ROE) stood at 32.1% for last year. They are able to attain this high ROE for some time now. The average ROE from 2018 to 2020 is 31.4%.
CAMS faces very limited competition in the market they operate in. None of their peers are listed. Their closest competitors are Sundaram BNP Paribas and Karvy. Hence, the company is planning to gain even bigger market share in the near future.
The company believes in client stickiness. Their top 10 clients have a healthy relationship of 19 years with the company.
The high potential of the industry and the company to grow in the future makes it a lucrative offer for the investors.
CAMS has 4 out of the top 5 mutual funds and 9 out of the top 15 mutual funds as their clients. Thus, the company has the biggest clients to serve in the mutual funds’ industry.
As we stated earlier, around 87% of the company’s revenue comes from their core business, i.e. Mutual Funds. They use more of paper-based MF transactions to generate revenue but slowly the industry is shifting towards digitalization.
CAMS have their valuation on a bit higher side. Their price-to-book value is 34,61 times FY20 EPS.
Do make your own studies before investing in any company. You can find the red herring prospectus submitted by CAMS, here.