CAMS IPO: Information Analysis

Incorporated in 1988, Computer Age Management Services (CAMS) is a technology-driven financial infrastructure and services provider to mutual funds, insurance providers and alternative investments funds (AIF). Headquartered in Chennai, CAMS is India's largest registrar and transfer agent (RTA). As of July 2020, it commanded an aggregate market share of about 70 per cent, based on mutual funds' average assets under management (AAUM) managed by its clients. Its top shareholders include NSE Investments, HDFC, HDFC Bank, HDB Trust and its promoter, Great Terrain, who together held 93.5 per cent before the IPO. In FY20, CAMS generated the majority of its revenue (87 per cent) from the mutual fund services business. Apart from their core business, mutual funds prefer outsourcing most of their work to CAMS. These include opening accounts, keeping end-to-end records, executing transactions, responding to investors' requests, providing risk management services, maintaining data and regulatory compliances for AMCs and so on. For all these services, CAMS charges a fixed fee as a per cent of the AAUM of AMCs. Fees charged for equity funds are higher than those charged for debt funds. Further, fees are charged based on the size of the AUM (assets under management). CAMS' clientele includes four of the five largest mutual funds, as well as nine of the fifteen largest mutual funds based on AAUM. So, its revenue growth is majorly correlated with the growth of its clients' AUM. The AUM of equity mutual funds serviced by the company grew at a rate of 19 per cent CAGR in the last five years to Rs 6.2 Lakh crores. According to a CRISIL report, the aggregate AUM of the Indian Mutual fund industry has grown at a CAGR of 18 per cent over the last five years and is expected to grow at a similar rate in the next five years. This growth is mainly driven by the growing awareness of investing in mutual funds and SIPs (systematic investment plans), rising investor participation and higher disposable income. The mutual funds RTA business is also expected to grow at approximately 15 per cent CAGR over the next five years. Strengths A. Dominant market share: CAMS enjoys a market share of approximately 70 per cent in the RTA business. Its market share has increased to 70 per cent from 61 per cent in the last five years. B. Stickiness with clients: Owing to the high cost of shifting RTAs, CAMS has maintained a long-standing relationship with its clients, averaging more than 19 years with its top 10 mutual fund clients. C. Big clientele: The company provides its services to four out of the five largest and nine out of the 15 largest AMCs (asset management companies) in India. D. Wide reach and range of services: The com