CAMS IPO opens today; should you subscribe to share sale?
BusinessToday.In September 21, 2020
The initial public offer (IPO) of Computer Age Management Services (CAMS) will open today. Shares of the company, which acts as a registrar and transfer agent of mutual funds, will be sold in a price band of Rs 1229-Rs 1230. The share sale will end on September 23. CAMS is selling 1.82 crore shares through the offer for sale (OFS) route. Face value will be Rs 10 per equity share.
CAMS will be listed on BSE on October 1. The firm intends to raise Rs 2,244 crore from share sale. It has already raised Rs 666.57 crore from anchor investors ahead of the opening of its initial public offer (IPO).
Total 35 investors, including 17 FPIs and 13 mutual funds, participated in the anchor's issue. CAMS has finalised the allocation of 54,19,230 equity shares to 35 anchor investors at Rs 1,230 per share. SmallCap World Fund, HSBC, Abu Dhabi Investment Authority, Government of Singapore, Nomura Funds Ireland Public, Amundi, Grandeur Peak Emerging Markets Opportunities Fund, Jupiter South Asia Investment Company, among others were the leading FPI investors in the company via anchor book.
Thirteen domestic mutual funds were allocated 36.46 per cent of the total anchor investment portion. Lot size for bidding in the IPO is 12 shares which will cost an applicant Rs 14,760.
One can apply for a maximum 13 lots comprising 156 shares which can be allotted to an individual for Rs 191,880.
The allotment of shares will be done on September 28 and initiation of refunds will be carried out on September 29.
NSE Investments intends to sell 1.82 crore equity shares, its entire stake of 37.48 per cent in its associate company CAMS through an offer for sale.
"The opportunity landscape for the MF business in India is huge, given low penetration and financialisation of household (HH) savings, thus providing long-term visibility. At Rs 1,230 per share (IPO price), CAMS is priced at 35x FY20 EPS, at a 10-15 percent discount to listed AMCs, Exchanges and Depositories. We expect stock to trade in-line with other comparables and further re-rate," said IIFL Securities while assigning subscribe call.
NSEIL which is the subsidiary of National Stock Exchange (NSE) owns 37.48 per cent stake in CAMS, followed by 5.99 per cent by HDFC, 3.33 per cent by HDFC Bank, 3.19 per cent by HDFC Trust, 4 per cent by Faering Capital India and 1.94 per cent by Acsys. Great Terrain, owned by Harmony River Investment, is the promoter of CAMS with 43.53 percent shareholding.
Jaikishan Parmar, Sr. Equity Research Analyst, Angel Broking said,"The company is India's largest registrar and transfer agent of mutual funds with an aggregate market share of approximately 70 percent based on mutual fund average assets under management. CAMS charges a percentage of AUM to AMC and charges more fees from equity mutual funds as compared to other categories of mutual funds. Change in the mix of the Mutual fund industry towards higher equity and the buoyant market will be beneficial for CAMS revenue growth. CAMS business model is asset-light, Hence, earnings are generously distributed among shareholders. Considering a healthy balance sheet, high return ratio, and market leadership position, IPO will see strong interest across market participants."
Lead managers for the IPO are HDFC Bank, ICICI Securities, Kotak Mahindra Capital and Nomura Financial Advisory And Securities (India) Pvt Ltd.
"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 (Rs 1,230), CAMS is valued at 35(x) FY20 P/E has leadership position, zero debt, healthy cash position and high return ratios. We recommend to SUBSCRIBE. " the brokerage said.
The company claims to be India's largest registrar and transfer agent of mutual funds with a market share of nearly 70 per cent, based on mutual fund average assets under management (AAUM), as of November 2019. Headquartered in Chennai, CAMS is co-owned by NSE Investments, Warburg Pincus, Faering Capital ACSYS Investments and HDFC Group.