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Computer Age Management Services CAMS IPO Review

CAMS (formerly known as Computer Age Management Services) is India’s largest registrar and transfer agent (RTA) of mutual funds. CAMS provides a comprehensive portfolio of technology-based services such as transaction origination interface, transaction execution, payment, settlement, record keeping, brokerage computation and compliance related services.

Issue Details:

Issue Opens: September 21 ,2020.
Issue Closes: September 23 ,2020.
Issue Size:  Rs.2240-2242 crore
Issue Price Band: Rs.1229-1230

No. of shares on offer:  1.8cr.
Minimum lot size (no of shares): 12.

Largest services provider in growing mutual funds market:

The Indian mutual fund industry comprises 41 AMCs with major market share contributed by top 10 AMCs. As on June 2020, ~59% of total MF AUM is managed by top five AMCs. 

As on June 2020, CAMS services four out of five largest AMCs - HDFC MF, ICICI Prudential MF, SBI MF and Aditya Birla Sun Life MF. In terms of top 15 AMCs, it has ~70% market share in MF RTA business. 

Financials:

Strong RoE, consistent EBITDA margin.

CAMS has delivered a robust financial performance with revenue growth from 478 crore in FY17 to 699 crore in FY20, registering 14% CAGR. Accordingly, CAMS has delivered consistent EBITDA margin in the range of 35-40% in FY17-20 while RoE has remained strong at or above 30% in FY17-20. 

CAMS IPO
source icici

Key risk and concerns:  

  • Growth dependent on AUM size and mix.
  • Information technology disruption to impact operations.
  • Concentration risks to persist.

Conclusion: The IPO is priced at P/E of ~34.5x FY20 on upper end of band. Though the companys has Strong RoE & consistent EBITDA margin, the pricing is on the higher side. 

The company has finalised the allocation of 54,19,230 shares at ₹1,230 apiece to 35 anchor investors, indicating good demand.

With current IPO market being booming, there will be good listing gains. Investors with long-term view can apply for the issue.

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