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    CAMS IPO details, analyst calls, management views: Should you subscribe?

    Synopsis

    NSE Investments would be selling 1,82,46,600 shares through the issue, following the February 4 Sebi directive to NSE to exit the company completely.

    Investors can subscribe to the IPO by betting for a lot of 12 shares or in multiples thereof.
    NEW DELHI: After the roaring success of Happiest Minds and Route Mobile, the Rs 2,242 crore IPO of CAMS is all set to hit Dalal Street on Monday.

    The anchor allotment for the issue, whose price band has been fixed at Rs 1,229-1,230, will take place on Friday.

    NSE Investments would be selling 1,82,46,600 shares through the issue, following the February 4 Sebi directive to NSE to exit the company completely. Investors can subscribe to the initial public offering (IPO) by betting for a lot of 12 shares or in multiples thereof.

    Here’s all you need to know about the CAMS IPO:

    1. What does the company do?
      Incorporated in 1988, the company is India’s largest registrar and transfer agent of mutual funds today, with an aggregate market share of 70 per cent based on mutual fund average assets under management (AAUM). The company’s MF clients include four of the five largest mutual funds and as well nine of the 15 largest mutual funds based on AAUM during July 2020.
      As of July, CAMS serviced Rs 19.2 lakh crore of AAUM of 16 mutual fund clients, according to the Crisil report.
      Anuj Kumar, President and CEO at CAMS said, the MF business is the largest source of revenues for the company, but there are other businesses that the company has built in over the last 5-10-years. They include the AIF business, insurance business and electronic collections. He said the company has 39 per cent market share in the insurance repository business, with 2.9 million policies held. In case of the AIF business, the company has 77 AIF clients with an AAUMs of Rs 16,000 crore, Kumar said in a virtual conference.
    2. Other businesses
      Besides, the company is into verification and maintenance of KYC records of investors for use by finance institutions. Kumar said the company received account in-principle approval aggregators in May 2018 and would soon launch the business services.
      Overall, revenues from the MF business stood at 86.9 per cent in FY20 while non-MF businesses accounted for 13.1 per cent of the total. The AIF business is somewhat similar to the MF business, Kumar said.
      Overall, data processing activity accounted for 79 per cent of the company's revenues in FY20. Customer care services added another 8.94 per cent. Margins of 37 per cent in FY20 was higher than 31 per cent in FY19 but equals FY18’s 37 per cent.
      “Being asset light, bulk of our profits are converted into cash, and thus the company has a healthy dividend policy,” said M Somsundaram, CFO at CAMS.
    3. No listed peer
      CAMS has no listed peer. In the AMC businesses, it can be compared with Sundaram BNP Paribas and more closely with Karvy. The latter handled 22 MF houses with a total AUM of Rs 7.30 lakh crore as of July 2020. This is against 16 clients that CAMS handles, with a total AUM of Rs 19.19 lakh crore.
      CAMS’ revenues for FY20 stood at Rs 699.60 crore against Karvy's Rs 449 crore.
      CAMS compounded annual sales growth stood at 12.8 per cent for FY15-20 against Karvy’s 9.1 per cent. It manages Rs 6,326 crore in AUM per branch compared with Karvy's Rs 3,237 crore.
      Ebitda margins for the company were better at 42.8 per cent compared with Karvy’s 36 per cent.
      As an insurance repository, the company has three peers in India. NSDL Database Management tops in terms of market share, handling 45 per cent of e-insurance policies and 32 per cent of accounts. CAMS Insurance Repository Services comes in second place, with 39 per cent policies and 32 per cent accounts.
    4. IPO decision not based on market rally: Management
      Kumar said his company began seeing institutional investments 20 years ago. After NSE came in, it also got engaged with many private equity players. “As would be normal with the company with similar stature, we decided to approach the capital market last year in July-August and filed the papers in January. It was a well-thought-out decision and has nothing to do with the recent market rally,” he said.
      Somsundaram said the company’s policy is to pay 65 per cent of the consolidated profit after tax (PAT) as dividend, which it plans to continue after the IPO.
    5. Strong institutional interest, says iBankers
      Pritish Kandoi, Executive Vice President at ICICI Securities, said when the company decided to approach the capital market last year, there was a lot of exuberance. “Institutional investors have perceived the company very well. We are expecting an overwhelming demand from institutional investors in the issue," Kandoi said.
    6. Valuations
      The issue is seeking a price-to-book value of 34,61 times FY20 EPS. Jaya Shankar of Kotak, one of the iBankers to the issue, said asset-light business models typically tend to be valued differently. “Investors tend to give a lot of weightage to the fact that the company generates a very high return on equity. The company did a global road show and the response was very good. The company has also kept domestic and international investors in mind,” he said.
    7. What do analysts say?
      Astha Jain of Hem Securities, who was in the middle of preparing the CAMS report, said she has a ‘subscribe’ rating on the issue with a long-term view, citing strong financials.
      Sanjiv Bhasin, Director at IIFL Securities said he would be applying in the CAMS issue. “I also applied in the Route Mobile issue. Yesterday, Warren Buffett became richer by $1 billion on the listing of a stock, which doubled in one day. It tells you that you are in a bull market,” he said.
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    12 Comments on this Story

    Nirad Patkhedkar22 days ago
    The gray market is indicating not big but still around 30% premium.
    Amar Khurana30 days ago
    encashment of market conditions by those companies who are less exposed to the investors
    Dhrub Kumar33 days ago
    Priced at EXTREMELY High level. Do not see any opportunity for growth in atleast 8-10 years. No listed peers for comparison. Better to overlook and avoid this issue. I have decided NOT to apply.
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