CAMS IPO

Insights into CAMS IPO

About the Company

CAMS, a Chennai based venture, was founded in 1988 and is a third party service provider to financial institutions. The company is co-owned by powerful shareholders- NSE Investments Limited, HDFC Bank, Warburg Pincus LLC (Global PE Firm), Faering Capital (Indian PE Firm) and Acsys Investments Private Limited (Founding Promoter).

About the IPO

The IPO of CAMS aims to raise INR 2,250 crores of capital through issuance of 18,246,600 equity shares at face value of INR 10. The IPO will open for subscription on 21st September (Monday) and close on 23rd September (Wednesday); same as the timeline of Chemcon Chemicals IPO. The price band of CAMS has been fixed at Rs. 1,229 to Rs. 1,230 with the minimum lot size to be of 12 shares (And multiples thereon). At an upper price band, a person has to invest at least INR 14,760 to be an investor in the firm. The firm,prior to its IPO, has attracted an anchor investment of INR 660 crores from 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. The fact that these anchor investors are known to be globally huge and reliable institutional investors, provides us with a good future outlook for CAMS IPO

CAMS IPO Details

IPO Date	21st Sep, 2020 to 23rd Sept, 2020
Issue Type	Book Built Issue IPO
Issue Size	1,82,46,600 Eq shares of ₹10 (aggregating up to ₹2,244.33 Cr)
Offer For Sale	1,82,46,600 Eq shares of ₹10 (aggregating up to ₹2,244.33 Cr)
Face Value	₹10 per equity share
IPO Price	₹1229 to ₹1230 per equity share
Market Lot	12 Shares
Min Order Quantity	12 Shares
Listing at	BSE

CAMS IPO Tentative Timetable

Bid/Offer Opens On	21st Sep, 2020
Bid/Offer Closes On	23rd Sept, 2020
Finalisation of Basis of Allotment	28th Sept, 2020
Initiation of Refunds	29th Sept, 2020
Credit of Shares to Demat Acct	30th Sept, 2020
IPO Shares Listing Date	1st Oct, 2020

Lot Size And Price

Application	Lots	Shares	Amount
Minimum	1	12	₹14,760
Maximum	13	156	₹1,91,880

Promoter Holding

Pre Issue Share Holding	43.53%
Post Issue Share Holding

What CAMS does:

CAMS is essentially a service provider to financial institutions and retail investors (General Public).

CAMS is the leading R&T agent for mutual fund agencies in India serving almost 70% of the average assets under management as of July 2020.

A Registrar and Transfer Agent (R&T Agent) is a third party affiliated with a mutual fund house that is responsible for keeping record transactions of all investors in the mutual fund, detail of dividend distribution, maturity dates of investments and form submissions to regulatory bodies such as SEBI.

In simpler terms, an R&T agent can be thought of as a one stop destination for all

information related to a particular asset management company. 

As for its B2C market in conjecture with retail customers, it provides a variety of touchpoints such as a pan India network of Service centers, White Label Call center, Online, Mobile app, and Chatbot Services.

Competition:

There are two main R&T agents in India—Computer Age Management Services (CAMS) and Karvy. These companies deploy technology enabled services to banks, NBFCs, private equity funds and mutual fund managers, etc.

The competition in this sector is very limited and entry barriers in the industry are set because of the need to have superior technology and skilled human resources.

In our opinion, whenever a sector has strong entry barriers, the companies can gain profits over the long term without any significant competition or threat.

CAMS being the only company out of the sector getting listed in the share market, it is expected to maintain monopoly from our point of view.

The P/E multiple of the company is 36.55 with Market price taken at upper price band level. There is no other company in the same sector competing with CAMS.

Important Finances

Summary Of Financial Information

Particulars	For the year (₹ in million)
	31-Mar-20	31-Mar-19	31-Mar-18
Total Assets	8,025.34	7,363.24	6,978.48
Net Sales	6,614.58	6,513.48	6,059.64
Total Revenue	7,213.43	7,118.08	6,578.20
EBITDA	2,252.98	1,762.52	2,325.98
Profit After Tax	1,734.56	1,308.95	1,463.05

Capital Structure:

While we were analysing the financial statements of CAMS, one of the most important things we came across is that this company does not have any kind of debt burden pertaining to both short-term and long-term loans. 

This company only utilises equity capital and retained earnings for its expansion and growth without any kind of financial leverage. Therefore, it does not carry the risk of defaults that come with other companies and the D/E ratio is essentially 0.

This is a very positive indication of the strength of the company's profitability.

Cash Flow Structure:

The cash flow from operating activities has increased over time with significant growth in period FY18-19 and gradual growth in FY19-20. The company generates enough profits to maintain stable operations with any debt burden. The cash flow from investing activities is negative because the company is investing in acquiring new assets and maintaining them. So, it is a positive sign of expansion by CAMS.

Another impressive point in the financial statements is that the cash flows from financing activities over the years are negative because the company is heavily distributing dividends to the shareholders.

Dividends Paid:

The company has paid out dividends to existing shareholders incrementally during FY2018-19 with most of the financing cash outflows resulting from the same. The dividends paid during FY2020 were lesser in amount, probably due to the need of reinvesting cash in the growth of the company and preparations of IPO.

From the cash flows, we can derive that the company has a huge inclination towards maximising the wealth of shareholders with efficient and profitable operations. 

Our Outlook:

Future outlook- very very very positive. Investing in this IPO can give you handsome returns in the share market.