The IPO of CAMS opens on Monday and the share price band has been fixed at ₹1,229-1,230. The issue closes on September 23. Ahead of the ₹2,250 crore IPO, CAMS raised over ₹660 crore from 35 anchor investors, including SmallCap World Fund, HSBC, Abu Dhabi Investment Authority, Caisse de Depot et Placement First State Investments, Eastspring Investments, Fidelity Investment Trust, Goldman Sachs, Government of Singapore, Nomura Funds Ireland Public Ltd.
Chennai-headquartered CAMS acts as a registrar and transfer agent (RTA) for mutual funds, providing technology-driven financial infrastructure and services provider to mutual funds and other financial institutions.
Lot size and probable listing date
The lot size of CAMS IPO is 12 when means that investors have to apply for a minimum of 12 shares and in multiples thereof. The shares of CAMS are proposed to be listed on both BSE and NSE. According to brokerages, the share allocation is likely to be finalised on 28 September while listing is likely to happen on October 1.
Minimum application for retail at upper price band for one lot is ₹14,760. A retail investor can apply for maximum 13 lots. Link Intime India Pvt Ltd is the registrar of the IPO.
CAMS is co-owned by NSE Investments, Warburg Pincus, Faering Capital ACSYS Investments and HDFC Group. The entire quantum of shares being sold to investors in CAMS IPO is NSE’s 37.4% holding or 1.82 crore shares. On the direction of SEBI, NSE is fully divesting its stake in the company through this IPO.
Computer Age Management Services Limited (CAMS) is India’s largest registrar and transfer agent (RTA) of mutual funds with an aggregate market share of around 70% based on mutual fund AUM managed. In FY20, CAMS generated 87% of the revenue from the mutual fund services business and in Q1 of FY21, CAMS reported a profit of ₹40.8 crore on revenue of ₹148.6 crore, says Geojit Financial Services.
What analysts say
LKP Securities has recommended subscribe to CAMS IPO, citing its leadership position, zero debt, healthy cash position and high return ratios.
“During FY17-20, CAMS’s overall revenue grew at a CAGR of 14% driven by strong growth in AAUM (15% CAGR). Over the same period, the EBITDA and net profit grew at a CAGR of 13% and 12% respectively. The company carries no debt obligation, thus translating in healthy return ratios with ROCE/ROE of 37%/35%. Furthermore, it is consistently paying dividend with FY20 payout at 40%. At higher price band ( ₹1,230), CAMS is valued at 35 times FY20 earnings, has leadership position, zero debt, healthy cash position and high return ratios. We recommend to subscribe,” the brokerage said.
Another brokerage Geojit Financial Services also has a subscribe rating. “At the upper price band of Rs.1,230, CAMS is available at a P/E of 34.6x and when we annualize Q1FY21 numbers we arrive at a P/E of 36.7x for FY21E on a post issue basis. Given that there is no listed peer to compare, and based on stable financial, we assign a subscribe rating on this IPO,” the brokerage said.
Nirali Shah, Senior Research Analyst,Samco Securities, said: “We recommend investors to subscribe to the IPO for listing gains. The company has a robust business with strong market leadership indicated by a 70% market share in the mutual fund RTA industry. Given the high entry barriers and the near duopoly nature of the market, the moat of the company remains intact. CAMS has also delivered strong operating margins and shareholder returns consistently and maintains a clean balance sheet with negative working capital.”
“With growth being linked to the rise in AUMs for Mutual Funds, the company is poised to generate consistent returns going forward. Investors just need to be cautious regarding the slower pace of growth as paper-based transactions which contribute a large part of revenues see a decline over time,” she said.