Computer Age Management Services Ltd. (CAMS) - IPO NOTE DETAILED ANALYSIS.

Computer Age Management Services Ltd. (CAMS)

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About the Company:

Promoted by Great Terrain Investment Ltd., Computer Age Management Services Limited (“CAMS”) was incorporated on May 25, 1988. CAMS is a technology-driven financial infrastructure and services provider to mutual funds and other financial institutions with over 2 decades of experience. CAMS offers an integrated and customized portfolio of services throughout its pan-India physical network comprising 271 service centres spread over 25 states and 5 union territories as on June 30, 2020, supported by call centres in 4 major cities and having 4 back offices (including a disaster recovery site), all having real-time connectivity, continuous availability and data replication and redundancy. Its mutual fund clients include 9 out of 15 largest Asset Management Companies (AMCs) based on AAUM during July 2020.

With the initiative of creating an end-to-end value chain of services, CAMS has grown its service offerings and currently provide a comprehensive portfolio of technology-based services and has leveraged its domain expertise, processes and infrastructure to diversify its offering of services in: 

1. Electronic payment collections services business; 
2. Insurance services business; 
3. Alternative investment funds services business; 
4. Banking and non-banking services business; 
5. KYC registration agency business; 
6. Software solutions business; 
7. Account Aggregator Business.

CAMS has developed Investrak.NET in-house, a mutual fund transfer agency platform, myCAMS, a mobile device investor interface application, GoCORP, a distributor focused application, and MFDEx a market intelligence product/information database, among many other services.

Business Overview.

Over the last 5 years, CAMS has grown its market share from 61% during March 2015 to 69% during March 2020, based on AAUM serviced, according to a CRISIL report. Its mutual fund clients include 4 of the 5 largest AMC’s as well as 9 of the 15 largest AMC’s based on AAUM during July 2020, according to the CRISIL report.

With the initiative of creating an end-to-end value chain of services, CAMS has grown its service offerings and currently provides a comprehensive portfolio of technology-based services, such as transaction origination interface, transaction execution, payment, settlement and reconciliation, dividend processing, investor interface, record keeping, report generation, intermediary empanelment, brokerage computation and compliance-related services, through its pan-India network to its mutual fund clients, distributors and investors.

As of July 2020, CAMS serviced ₹19.2 trillion of AAUM of 16 mutual fund clients. The 10-year CAGR of quarterly average assets under management (QAAUM) of mutual funds between March 2010 and March 2020 was 13.4%, while the 10-year CAGR of QAAUM of mutual funds serviced by them over the same period was 15.8%. The 5-year CAGR of QAAUM of mutual funds between March 2015 and March 2020 was 

18% according to the report, while the 5-year CAGR of the QAAUM of mutual funds serviced by them over the same period was 21%. Further, its mutual fund clients had 1.98 crore SIP accounts as on June 30, 2020. 

The growth of the assets under management (AUM) of its mutual fund clients is important to them, as a substantial portion of its mutual fund revenues are based on the mutual fund AAUM of its clients. As a result of the nature of the funds and services provided, CAMS charges more fees from equity mutual funds as compared to other categories of mutual funds. The AUM of equity mutual funds serviced by them grew from ₹2,18,000 crore as of March 31, 2015, to ₹5,22,800 crore as of March 31, 2020, at a CAGR of 19.1%, 

and as of June 30, 2020, was ₹6,19,000 crore.

Business Update

Over the years, CAMS has leveraged its domain expertise, processes and infrastructure to diversify its offering of services to cater to a variety of other financial services sectors:

1. In the electronic payment collection services business, CAMS manages mandated transactions, including registering of mandates, initiation of collections, reconciliation and the related reporting services for mutual funds, non-banking finance companies and banks.
2. In the insurance services business, CAMS offers processing of new business applications, holding policies in dematerialized form, servicing policies and other support functions to insurance companies. For the financial year 2018, CAMS had a market share of 39% of the insurance repository business, based on e-insurance policies being managed, according to a CRISIL report.
3. In the alternative investment funds services business, CAMS provides services to investors to manage records and perform fund accounting and reporting, among other services, for alternative investment and other types of funds.
4. In its banking and non-banking services business, CAMS offers digitization of account opening, facilitation of loan processing and back-office processing services to banking and non-banking financial institutions. 
5. In its KYC registration agency business, CAMS verifies and maintains KYC records of investors for use by financial institutions. 
6. In the software solutions business, CAMS technology team develops software for its mutual funds services business and for AMC’s.

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CAMS technology-driven infrastructure and services are integral to the operations of its clients. Its solutions help reduce the need for the clients to make significant investments in operational infrastructure, thereby allowing them to increase their focus on their core business activities. Further, it offers many of its services online and through its several mobile device applications to investors, its clients, their distributors and their channel providers. The continuous development of proprietary platforms and applications has further strengthened its competitive technology.

Business Verticals

1. Mutual Funds services business
2. Electronic payment collection services business
3. Insurance services business
4. Alternative Investment Fund services business
5. Banking and non-banking services business
6. KYC Agency business
7. Software solutions business
8. Account aggregator business

Objective of the Issue

The company will not receive any proceeds of the issue and the entire proceeds will be received by the selling shareholders.

Competitive Strengths

1. Largest infrastructure and services provider in a large and growing Mutual Funds market.
2. Integrated business model and a longstanding client relationship in its Mutual Fund services business segment.
3. Scalable technology-enabled ecosystem.
4. Strong focus on processes and risk management
5. Experienced management and board and marquee shareholders.

Weakness

1. The future revenue and profits are largely dependent on the growth, value and composition of AAUM of the mutual funds managed by the clients.
2. Significant disruptions in the information technology systems or breaches of data security can adversely impact the business reputation.
3. A significant part of revenue comes from a few clients and any loss of one or more such client will significantly impact the business of the company.

Key Business Strategies

1. Maintain the leadership position by enhancing service offerings to Mutual Fund clients.
2. Continue the technology-led services innovations.
3. Achieve leadership in individual businesses and then target scale.
4. Improve automation in the businesses.

Snapshot of financials

Particulars	Data as on March 31, 2020    (Rs in crores)
	30-Jun-20	31-Mar-20	31-Mar-19	31-Mar-18
Equity Share Capital	48.79	48.76	48.76	48.76
Reserves	479.41	491.05	392.53	394.76
Net Worth	528.20	539.81	441.29	443.52
Revenues	148.63	699.63	639.64	641.54
Revenue Growth	15.07%	0.86%	8.12%	-
EBITDA	45	260.66	217.31	240.25
PAT	40.83	173.46	130.90	146.31
PAT as a % revenue	27.47%	24.79%	18.87%	22.81%
EPS	8.37	35.57	26.75	29.93
Divedend	-	224.70%	150%	150%

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Promoters and Key Managerial Personnel

Great Terrain Investment Limited is the promoter of the company, and currently holds an aggregate of 2,12,24,000 equity shares, aggregating to 43.5% of the pre-offer issued, subscribed and paid-up equity share capital of the company.

Great Terrain was incorporated as a private company limited by shares, with limited life, under the laws of the Republic of Mauritius on September 6, 2017. Great Terrain holds a Category I Global Business License issued by the Financial Services Commission. The Great Terrain is an investment holding company with the principal activity of carrying out investment activities under the provisions of Republic of Mauritius Financial Services Act, 2007. 

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. Great Terrain acquired the equity shares of the company pursuant to the share purchase agreement. Somasundaram, SR Ram Chandran, Srikanth, Abhishek Mishra are a few key managerial personnel of the company.

Offer Details

Details
Fresh Issue	-
OFS Comprises of	Up to 1,82,46,600 equity shares
1) NSE Investments Ltd	Up to 1,82,46,600 equity shares
Price Band	Rs 1229-1230
Bid Lot	12 shares

Issue Shares Break Up
QIB	50%
NIB	15%
Retail	35%
Face Value	Rs 10
Issue Size	Rs 2240 cr to Rs 2242 cr

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Shareholding
Promoters	43.50%
Public	56.50%
Total	100%

Events	Dates
Bid/Offer Opens	September 21, 2020
Bid/Offer Closes	September 23, 2020
Finalisation of basis of allotment	September 28, 2020
Initiation of refunds	September 29, 2020
Credit of shares to depository	September 30, 2020
Commencement of trading	October 01, 2020

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This article and the process of identifying the potential of a company has been produced for only

learning purpose. Since equity involves individual judgements, this analysis should be used for only

learning enhancements and cannot be considered to be a recommendation on any stock or sector. Our

knowledgeable team has limited understanding and we all are learning the art and science behind this. 

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