CAMS IPO is slated to raise Rs 2,242 crore and consists an offer for sale of 1,82,46,600 equity shares by the NSE Investments, the subsidiary of National Stock Exchange of India.. NSE Investments is going to offload its almost entire 37% stake in CAMS via IPO. CAMS (formerly known as Computer Age Management Services)is India’s largest registrar and transfer agent (RTA) of mutual funds.

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CAMS IPO Details

Issue Period21-09-20 to 23-09-20
Issue DetailsOffer for Sale of upto 18,246,600 Equity Shares
Issue Size (₹ Cr)₹ 2,240 Cr – ₹ 2,242 Cr
Price Band₹ 1,229 – 1,230
Bid Lot12 Shares 
Employee Reservation182,500 Equity Shares
Employee Discount₹ 122 per Equity Share
Issue Structure : 
QIB50% of the Net offer
NIB15% of the Net offer
Retail35% of Net offer; 6,322,435 Shares ;  778 Cr
BRLMsKotak Mahindra Capital, HDFC Bank, ICICI Securities, Nomura Financial
RegistrarLink Intime India Pvt. Ltd.

Updates

  • ANCHOR ISSUE:

About CAMS Ltd.

  • CAMS is a technology-driven financial infrastructure and services provider to mutual funds and other financial institutions with over two decades of experience.
  • CAMS 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”).
  • CAMS 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 its pan-India network to its mutual fund clients, distributors and investors.
  • CAMS also provides certain services to alternative investment funds, insurance companies, banks and non-banking finance companies
  • CAMS offer an integrated and customized portfolio of services through our pan-India physical network comprising 271 service centers spread over 25 states and five union territories as of June 30, 2020, and which are supported by call centers in four major cities, four back offices (including a disaster recovery site), all having real time connectivity, continuous availability and data replication and redundancy. Further, we offer many of our services online and through our several mobile device applications, to investors, our clients, their distributors and their channel providers.

CAMS Ltd.: Financials

Particulars/ Rs Cr. Q1FY21Q1FY20FY20FY19FY18
Revenue from Operations148.63175.01699.63693.64641.54
Revenue Growth (%)-15.07%0.86%8.12%
EBITDA as stated4561.98260.66217.31240.25
Profit Before Tax53.2759.86250.78200.87226.58
Profit after Tax40.8340.15173.46130.9146.31
PAT as % to revenue27.47%22.94%24.79%18.87%22.81%
Share Capital48.7948.7648.7648.7648.76
Reserves479.41409.4491.05392.53394.76
Net Worth528.2458.16539.81441.29443.52
EPS (₹)8.378.2335.5726.7529.93
RoNW (%)30.92%35.02%32.13%29.56%32.91%
Net Asset Value (₹)108.2793.96110.7190.590.96
FV10    
IPO Price1230
EPS  Fy2035.55
PE FY2034.60
P/BV11.36
Market Cap7170
Mcap/Sales10.25

Pros

  • CAMS is promoted by marque investors.
  • Great Terrain, wholly owned by Harmony River Investment, is the promoter of CAMS with 43.53% stake. Harmony River Investment is owned by PE funds managed by US-based Warburg Pincus. Great Terrain is to sell and transfer 61,08,400 equity shares, prior to the bid/offer opening date. After such transfer, Great Terrain will hold 30.98 percent of the paid-up capital.
  • NSEIL (the subsidiary of National Stock Exchange) held 37.48% stake in CAMS, HDFC 5.99%t, HDFC Bank 3.33%, HDFC Trust 3.19 %, Faering Capital India 4 % and Acsys 1.94 %.
  • Largest Infrastructure and Services Provider in a Large and Growing Mutual Funds Market.
  • Integrated Business Model and Longstanding Client Relationships in our Mutual Funds Services
  • Scalable Technology Enabled Ecosystem
  • Strong Focus on Processes and Risk Management
  • Experienced Management and Board.
  • CAMS has an established track record of delivering robust financial results. Its otal income for the three months ended June 30,
  • 2020 and the financial year 2020 was ₹1,634.61 million and ₹7,213.43 million, respectively.

Cons

  • Cybersecurity threats to its information technology infrastructure
  • Existing promoters and investors could exit their stake post lockin phase.
  • Falling share of paper based transactions could put pressure on margins

CAMS IPO: Assessment

  • CAMS serves the Mutual Fund industry in the country and is much ahead of its other rival Karvy. High entry barriers have led to duopoly structure of RTA industry. CAMS mutual fund clients include four of the five largest mutual funds as well as nine of the 15 largest mutual funds based on AAUM during July 2020.
  • The Indian mutual fund industry has been recording good growth with the average AUM (AAUM)CAGR of 18.3% from Rs.11.9 trillion to Rs.27.6 trillion during FY15-2020.
  • Over the last five years, CAMS market share has grown from approximately 61% during March 2015 to approximately 69% during March 2020, based on AAUM serviced, according to the CRISIL Report.
  • CAMS has a strong reach and market share, CAMS services ~70% of the Mutual Fund industry AAUM through its wide network of 271 service centres across the country.
  • CAMS charges more fees from equity mutual funds as compared to other categories of mutual funds. The AUM of equity mutual funds serviced by CAMS rew from ₹2,180 billion as of March 31,2015 to ₹5,228 billion as of March 31, 2020, at a CAGR of 19.1%, and as of June 30, 2020 was ₹6,190 billion.
  • Major stake in CAMS is held by PE funds managed by US-based Warburg Pincus with about ~31% stake and other marque investors.
  • As per management, CAMS policy is to pay 65% of consolidated profit after tax as dividend, which it plans to continue after the IPO.
  • On the Post issue equity, P/E works out to be ~ 34 based on Fy20 results. The demanded P/E valuation and large stake sale of 37% may limit the type of upsides seen in some recent IPOs. However there are good chances that CAMS experience sustainable profit growth, high RoEs and strong free cash flow generation which may make the valuations being demanded as reasonable.
  • I intend to apply in CAMS IPO and chances of allotment are somewhat better due to relatively moderate issue size.
  • As on 18-09-20, CAMS IPO was commanding a Grey market Premium (GMP) of Rs. 300 or a few notch below. This is somewhat down from the earlier GMP being commanded. There can be variation in these rates from day to day.
  • Do check this page for any last minute updates

Standard disclaimer:  I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2)  Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors.  I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or  leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.