The IPO of CAMS, which opened on Monday, was fully subscribed by 11 am on Day 2. The share price band of Computer Age Management Services Limited (CAMS) issue has been fixed at ₹1,229-1,230. The issue closes on Wednesday. Ahead of the ₹2,250 crore IPO, CAMS, which acts as a registrar and transfer agent (RTA) for mutual funds, raised over ₹660 crore from 35 anchor investors.
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 will get 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. Link Intime India Pvt Ltd is the registrar of the IPO.
Minimum application for one lot at upper price band is ₹14,760. A retail investor can apply for maximum 13 lots.
The entire quantum of shares being sold to investors in CAMS IPO is NSE’s 37.4% holding or 1.82 crore shares. NSE is fully divesting its stake in the company through this IPO on the direction of market regulator Sebi.
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.
The five-year CAGR of quarterly AAUM of mutual funds between March 2015 and March 2020 was 18% according to a Crisil report, while the five-year CAGR of the quarterly AAUM of mutual funds serviced by CAMS over same period was 21%. A significant portion of CAMS mutual fund revenues are based on the mutual fund AAUM of its clients.
“CAMS stands to benefit from the high entry barriers in the industry. The MF RTA business is technology intensive and requires extensive branch network and high operating leverage. Notably, it is challenging for the clients to replicate CAMS’ physical network or technology platforms in-house,” says domestic brokerage Anand Rathi.
The revenues of CAMS have increased from ₹641.5 crores in FY18 to ₹699.6 crores in FY20 while consolidated PAT improved from ₹145.9 crores in FY18 to ₹173.4 crores in FY20. “Also, the company has zero debt and exhibits healthy cash flows. Additionally, the company’s dividend distribution policy calls for a payout of at least 65% of consolidated net profit,” says Anand Rathi.
What analysts say
LKP Securities has recommended subscribe to CAMS IPO, citing its leadership position, zero debt, healthy cash position and high return ratios.
Another brokerage Anand Rathi also has a subscribe rating. “While currently there is no listed player to compare, we believe the IPO is reasonably priced considering the latest numbers. We remain optimistic on growth prospects of CAMS, given its leadership position in the market, scalable technology with robust infrastructure, strategic growth initiatives, high entry barriers in the industry and gradual growth in AAUM in the coming periods,” the brokerage said in a note.