Technology-driven CAMS has emerged as India’s largest registrar and transfer agent of mutual funds with an aggregate market share of 70% serving four of the five largest mutual funds as well as 9 of the 15 largest mutual funds based on AAUM.
MUMBAI, Sep 18 (BNC Network) NSE Investments Limited is set to walk away with a whopping Rs 2,240 crore as it will fully exit India’s largest Mutual Fund registrar and transfer agent CAMS (Computer Age Management Services), backed by Warburg Pincus.
The NSE subsidiary will download 18,246,600 equity shares of face value of Rs 10 each at a with a price band of ₹ 1,229-1,230 apiece in the three-day initial public offering that opens on September 21. SEBI has in February this year directed the NSE to divest its entire stake in the CAMS that it held through NSE Investments.
As the Offer is an offer for sale of Equity Shares, CAMS will not receive any proceeds from the Offer. CAMS, however, expects that listing of the Equity Shares will enhance its visibility and brand image and provide liquidity to the shareholders and will also provide a public market for the Equity Shares in India.
CAMS CEO Anuj Kumar says the Company has capital sponsorship from marquee investors such as Great Terrain (an affiliate of Warburg Pincus), HDFC Limited, HDFC Bank Limited and NSE Investments Limited.
Technology-driven CAMS has emerged as India’s largest registrar and transfer agent of mutual funds with an aggregate market share of 70% serving four of the five largest mutual funds as well as 9 of the 15 largest mutual funds based on AAUM, says Kumar quoting a CRISIL report..
CAMS’ key clients include HDFC Asset Management Co. Ltd., ICICI Prudential, Asset Management Co. Ltd., Aditya Birla Capital Ltd., SBI Fund Management Pvt. Ltd., DSP Investment Managers Pvt. Ltd., Kotak Mahindra Asset Management Co. Ltd. and Franklin Templeton Asset Management (India) Pvt. Ltd.
Axis Capital IPO note explains that CAMS was incorporated as ‘Computer Age Management Services Private Limited’ on May 25, 1988. Great Terrain Investment Limited is the Promoter of the company, currently holds an aggregate of 21,224,000 Equity Shares, aggregating to 43.503% of the pre-Offer issued, subscribed and paid-up Equity Share capital of the company.
Great Terrain is wholly owned by Harmony River Investment Ltd, which is directly owned by certain private equity funds, which are managed by Warburg Pincus LLC, New York.
The ten-year CAGR of QAAUM of mutual funds between March 2010 and March 2020 was 13.4% according to the CRISIL Report, while the ten-year CAGR of QAAUM of mutual funds serviced by us over the same period was 15.8%. Further, the AUM of equity mutual funds serviced by us grew 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. In addition, the number of folios serviced by us grew from 39.4 million as of March 31, 2020 to 39.8 million as of June 30, 2020. “We believe our operating model has assisted in contributing to the growth of our mutual fund clients by providing real time, uninterrupted, pan India services,” CAMS offer document says.
According to the CRISIL Report, while the growth in the Indian mutual fund industry is expected to be near-flat during the financial year 2021 on account of the COVID-19 pandemic, QAAUMs are expected to increase after the financial year 2021.
The key growth drivers of the Indian mutual fund industry are expected to include anticipated economic growth, a growing investor base, higher disposable incomes and investable surplus, increasing aggregate household and financial savings, increase in geographical penetration as well as better awareness, ease of investing, digitalisation and perception of mutual funds as long-term wealth creators. As a result of our domain expertise, established processes, technology driven infrastructure and marquee clients, we are well positioned to capitalize on such growth.
CAMS says its competitive technology advantage stems from the capability, functionality, integration and scalability of our proprietary platforms, which deliver breadth and quality of service and cost efficiencies. From handling over 98 million transactions in FY 2015, it grew to take care of 328 million transactions during FY 2020. The continuing investment in proprietary IT platforms continues to strengthen this competitive advantage by further increasing operating leverage, driving ongoing innovation, anticipating industry developments and delivering increased efficiencies while continuing to provide its integrated services.
CAMS has implemented a cyber security and cyber resilience policy and established a technology committee comprising of eminent specialists from IIT Bombay and IIT Madras, as well as the banking industry. The committee meets quarterly and reviews the robustness and resilience of our systems and processes.
The Company aims to maintain its leadership position by enhancing the service offerings while focusing on increasing our mutual fund client base by attracting new mutual funds.
We believe that electronic transformation and advancement is integral to the mutual fund industry.
Through automation, CAMS plans to not only improve cost efficiencies but also enhance customer experience. “We are currently engaged in several automation projects, including automation of subscription reconciliation, purchase and SIP processes, document receipts and storage,” the offer document says.
Analysing the issue, broking house Choice says the macros of mutual fund RTA is positive and is likely to witness a secular growth trend. CAMS have an asset light business model in the duopoly RTA market. It has debt free operations and demonstrated almost stable financial performance with significant cash flow generation. Also it is a consistent dividend paying company with an average payout ratio of over 55%. Despite positive fundamentals, Choice believes that the demanded valuation is little stretches. Hence, the broking house assigns a “Subscribe with Caution” rating for the issue.