The upcoming IPO from Computer Age Management Services Limited (CAMS) is likely to be among the host of new IPOs that are set to hit the stock market in the second half of this financial year. Here’s everything that you need to know about the CAMS IPO.
About the company
Established in the year 1988, Computer Age Management Services Limited is a technology-driven financial services and infrastructure provider to Mutual Funds and other Financial Institutions. Over the years, the company has grown tremendously and is currently the country’s largest registrar and transfer agent (RTA) of mutual funds, commanding an impressive market share of around 69.4% of the mutual fund market.
Compliance-related services, dividend processing, settlement and reconciliation, and electronic payment collection services are some of the many financial services that CAMS provides its clients. With around 278 service centres spread across 25 states and 5 union territories, the company boasts of an extensive network for customer outreach. Its long-standing relationship with an impressive list of clients will continue in the future because of the deep integration and integrated business-models that CAMS handles for them.
Largest Infrastructure and Services Provider in the MF RTA space:
CAMS is the largest MF RTA in India with 70% market share (61% in FY15). It caters to four of the five largest MFs in India as well as nine of the 15 largest MFs based on AAUM as of July’20. CAMS has showcased strong growth in overall AUM (23% CAGR) and equity AUM (30% CAGR) serviced, market share (+9pp), folios serviced (13% CAGR), accounts handled (21% CAGR) and transactions processed (27% CAGR) over the last 5 years.
Over FY17-20, CAMS Revenue/EBITDA/PAT grew at a CAGR of 14%/13%/12%. The balance sheet is lean with zero debt and negative working capital, thus resulting in healthy return ratios (FY20 RoE/RoCE at 35%/37%). It has been consistently generating strong free cash flow over the last four years, with FCF/PAT conversation at 107% in FY20. It is a consistent dividend paying company with FY20 payout at 40. The company has also consistently been posting profits for the past three consecutive financial years and has a strong asset base and revenue flow.
CAMS has now planned to raise additional capital by issuing its shares to the public. The company has also filed a Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India in this regard.
Details of the CAMS IPO
Let’s take a look at some of the important details of this upcoming IPO including the CAMS IPO date and the CAMS share price band.
CAMS IPO date
Since only the Draft Red Herring Prospectus has been filed till date, the CAMS IPO date remains shrouded in mystery. That said, the CAMS IPO issue is likely to be scheduled to open up to the public for subscription sometime during the second half of the current financial year.
CAMS IPO issue size
The entire INR22bn new IPO consists of only OFS of 18.2mn shares by one of the investors - NSE Investments. The exit of NSE group in full paves way for listing on NSE platform in future. The implied post issue market cap stands at of INR60bn.
The total issue size of the CAMS IPO also consists of an employee reservation portion. Around 182,500 shares are especially reserved for purchase by eligible employees of the company.
Valuation & View:
At the higher end of the price band, the issue is valued at 35x FY20 P/E, which seems fully priced in. However, we like the company, given its leadership position, integrated business model, pan-India presence and robust financials. We recommend Subscribe for Long Term to the IPO as CAMS enjoy first mover advantage, asset light business model and high entry barriers. Risk: (1) Top 5 clients contribute 71% to its revenues, (2) technological disruption and (3) data security & privacy.
CAMS share price band
The CAMS share price band of the IPO has not been announced as of yet. Since the CAMS share price is only Rs. 10 per equity share at face value, the equity shares up for sale through this IPO are likely to carry a hefty premium.
CAMS IPO listing
The CAMS IPO is proposed to be listed on the Bombay Stock Exchange (BSE). The company has also received an in-principle approval from the concerned stock exchange in this regard.
CAMS IPO objectives
Since the entire CAMS IPO issue consists only of promoters offloading their stake via the OFS route, the company would not receive any proceeds from this issue. Therefore, the company cannot make use of any of the funds from this sale for furthering any of its objectives.
Now all you need, is an online demat account to invest in CAMS IPO and make the most of your investments!
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