CAMS IPO - Detailed Review on Price, Financials, Valuation, SWOT - YouTube

Friends, many of us invest in mutual funds

But how many people would have noticed

Who is processing his data

For example - there are so many transactions

Electronic payment, dividend transactions take place

The mandate of SIP, application processing takes place

Enough infrastructure has to maintain online

Who would do that

The short answer to that is some mutual companies do itself

But a majority of mutual fund companies outsource it

An outsourcing company who do this type of work for mutual funds is

"CAMS"

Cams is India's no.1 company that handles and process the majority of mutual fund industries data in India

Apart from this, cams have other businesses also

We will talk about them in this video

Cams IPO is arriving, we will focus on that

His draft red herring prospectus (DRHP) is already released on 11 September

Its RHP is 300 pages long

I'm sure many people won't read it

I will summarize it for you

And with this, we start a series of IPO's analysis

So in this video, we were going to do a detailed analysis

In which we will talk of company & its businesses, know about the shareholders and its promoters

We will see financials and valuation

Will see competitor analysis

And about the company future growth prospects

And simultaneously do a SWOT analysis, strength, weaknesses, opportunity and treats

And along with it, we will see details of the IPO

And finally, conclude it

Namskar, My name is Mukul and you watching Asset Yogi

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The easiest way to invest in IPO is by Demat account

Because we can apply online by it

I have already done a detailed video on how to apply IPO online

You can watch it

If you do not have a Demat account, you can open it from a link in the description

If interest in some IPO is more then chance of getting it is reduces

Because of the lottery-based system

For increasing our probability we can apply with multiple accounts

For example - through your friend, mother, sister and others

In this video, we gonna know about the cams IPO

Then still if you have queries regarding this IPO

For that, I will come live on Instagram at 21-sep 7:30 PM

You should note the timing

On that live stream, we will handle all the queries

In fact, we have started sharing interesting infographics on Instagram

You can check that

Let us first talk about the company and its business

In one line it is a technology-enabled financial infrastructure and services business

It has mainly 4 subsidiaries

They provide back-end services to different types of fund houses or organisation

The first subsidiary is among the four is

Cams insurance repository services limited

Where they do back-end work of the insurance companies

Process all its applications, data processing

In today's date, E-insurance is came

They keep the insurance in Demat forms

They handle its agent onboarding and training, and other back-office operations

Cams has a 39% share in the E-insurance market

They basically come second in this as 45% share NSDL have

The second subsidiary of cams is

Cams investor services private limited

Here they do business of KYC

KYC registration, what so ever your KYC requirements

They do for different fund houses at one place

The third subsidiary is

Cams financial information services private limited

Where they do their maximum work

They do backend services for mutual funds

They do electronic payment collection there

All the transaction mandate

Sip people which invested

So, they process all the data

With that, they also handle the customer service operation of mutual funds

In today's date, these are the largest mutual fund registrar & transfer agent

They have a 70% market share of it

If we talk about some numbers

They have 4 clients from the top 5 mutual funds

If we talk about the top 15 then they have 9 of them

They have a total of 16 mutual fund clients

The number of total accounts they handle is 71.8 million

His revenue comes directly from the asset under management

In the mutual fund, they charge a percentage of it as a fee

They charge different funds differently

In this equity mutual funds are charged at a high fee

Similarly, they process the data for the Alternative investment fund

There he has 77clients

The AIF services and insurance business of it are on rising

The insurance business is new to them, this also rising

And his fourth subsidiary is sterling Software Pvt ltd

They developed technology and software for themselves & mutual funds clients

They have a software arm in Germany,

Which they closing due to some labour laws issues

They also bind up its banking and non-banking services business

BY December 2020 they close these two businesses

Because they think it is not its core businesses

They want to focus on its core businesses

If we talk of its geographical presence of it

Because they maintain a physical infrastructure also

They have 278 service centres across 25 states and 5 UT's

Because they handle and process the data & form collection and its data entry of mutual funds

Let's take a brief look at the history of a company,

Promoters & shareholders

The company was incorporated on May 25 1998 in Madras, Tamil Nadu

Its initial shareholder was B.H Kothari & NINA B. Kothari

I tell you that Nina Kothari is a sister of Mukesh Ambani

Shareholders are changed over the time

Great terrain investment ltd. is a current majority shareholder or the promoter of it

Great terrain is brought a majority stake in it, in previous two years

NSE investment was its previous promoter, two years ago

NSE investment is basically a subsidiary of the national stock exchange

Great terrain buy the stake from multiple shareholders and become a promoter with a 43% share

Along with this, Sebi direct NSE investment to sell all of its stake in it

Due to which this IPO is coming

Some portion of its stakes it will sell in the form of an IPO

And some portion is already sold to the institutions

Stake which sells to the institutions, 12.52% from great terrain

After stake sell to the institutions, great terrain shareholding reduced to 30.98%

And NSE investment has to sell all of its 37.48% stakes

In which it has sold 0.08% Pre IPO to institutions

The remaining 37.4% will come in IPO

This IPO is actually, offer for sell

That means the company won't be getting the money, all of it will go to NSE investments

So, if we talk about the overall exit, the stake which is to sell is 12.52% of great terrain & remaining that is of NSE will be 50%

So, a 50% stake will now go to public

So, the stake sale Pre IPO & during IPO, you can see the stakeholding pattern on your screen

Now, we will talk about Financials & valuation, firstly we will see the financials

Revenue in the three last years

Look at the revenue growth of it

All the figure you see is in million if we convert it into crore

Then it is 657Cr in 2018

Which grow to the 711Cr in 2019

So the growth in the revenue is 8.21%

But, If we talk of 2019 to 2020

It grows from 711Cr to 721Cr, not much revenue growth here

It grows by 1.33% only

If we try to understand the reason for it

The total expense ratio of mutual funds

Sebi set limits on it, So mutual funds do deduction in it

As we have seen before

His revenue is directly linked to the AUM of mutual funds

AUM means how many assets are under its management

Mutual funds total expense ratio in which his fee also include

This fee will also be included,

Some from it are reduced which results minimise the revenue,

We can see June 2020 results comparing it with June 2019

Here revenue decreases

Because of the covid business are impacted,

So this business is not so different in that

This impact can be seen in the upcoming 1 or half-year,

Talking about the profits

Which decrease from 146Cr in 2018 to 130Cr in 2019

In a detailed financial statement

Their operating expenses have been increased in that year

They cover up it, In 2020, 32% growth can be seen in profit

173Cr of profit are seen here

Their profit margins are also very good

Their operating profit margins (PBIT) is 33 to 35%

And net profit margin is 24 to 25%

Because of good margin, the return on equity is also good

Return on equity for FY20 is around 32%

Which is quite impressive

Return on equity means

How many returns do we get on net worth, how good returns are on the money we invest

Along with that other thing is to notice

His growth pattern generally linked with the the growth pattern of the mutual fund's industry

His revenues grow as mutual fund industries grow

Apart from this, there is s another important financial information

Which I share with you

This company is the High dividend-paying company

They share 65% of the net profit as dividends, this is its dividend policy

They will continue this policy after listing also

If we think of investing in this company

Then we do investment for the dividends

Let's talk of Valuation

Is the price of an IPO is justified

If we talk of price earning ratio

If talk of the upper band then its P/E ratio is 34.61

This premium being taken for a good return on equity 30-32%

If we want to compare this to its competitor company who is listed

Then Exact of this type of competitor company is not listed

If talk of its competitors

In which we talk of Mutual funds, Software Solutions, or Alternate Investment Funds services

Then there he has only one competitor which is KFIN technologies Pvt. Ltd.

Which was previously known as Karvy

Basically, this is the two players industry there is

CAMS and Karvy

And the Lion share is held by the CAMS

If we see the comparison of revenue from operations

CAMS has a turnover of around 700Cr

And Karvy has 450 crores

In other parameters like growth rates CAMS is much better than Karvy

One thing is also important is that how much the AUM per branch is handled

This means one branch can handle how many assets under management

so this number is 6326 million for the CAMS, AUM per branch,

And 3237 for karvy per branch,

So the efficiency of CAMS is doubled compared to Karvy

Now let's do the swot analysis,

Strength, weakness, opportunity and threats also are discussed

Its biggest strength is that it is the largest player in the mutual fund industry

Which provide financial services or infrastructure,

Secondly, it has started good penetration in the insurance industry

NSDL whose market share is 45%, then it is on second no. with 39% market share

Its third strength is that it is an integrated business & technology platform, that is given to all the mutual funds

This means if there is a particular AMC or a mutual fund company

They say that they will develop the infrastructure by themselves

Then they have to bear the total cost

Here, they got the cost efficiency as the total cost is been divided into different AMCs

With this, they can also share the entire business intelligence with different mutual funds

Then their fourth strength is, they know compliances & regulatory requirements very well

As they have been in this industry for a long time

They know all the regulatory requirements like SEBI, IRDA, PFRDA

The fifth strength is, they have an extensive branch network, as we have talked about earlier, they have 278 branches

Till now many works are done physically especially in Tier-1 & Tier-2 cities

The next strength is that they have an experienced management

So, we have talked about strengths, now we will talk about their weaknesses

The first weakness is that their concentration of revenue is high with few clients

So, their top 5 clients give them 70% of revenue, & if they lost a single client then the revenue loss will be high

The second weakness is, promoter interest & sustainability

As we have talked earlier, their main promoter, great terrain has come two years ago

Basically, it is a Mauritius based investment company

And the company's promoter is Harmoney River Investment LTD.

Harmoney River Investment LTD. had pledged the entire shares of Great terrain against a loan

So, it is a weakness as the promoter can be changed again

Now we will talk about opportunities

The mutual fund industry is growing & it can be a big industry in the Indian market

So this is a big opportunity for this company

The second opportunity is, increase in E-Insurance, mostly work is done in Demat accounts

And less physically work, so it can be an opportunity for this company

Thirdly Alternative investment funds can also be a big opportunity

Because it is also a similar task as mutual funds and can also be done for the AIF

So their revenue will be diversified,

In threats, we have already discussed its one threat,

That because their regulatory requirement they can suffer a loss as a penalty if they, not compliances

And as we have talked about earlier SEBI limit the total expense ratio, which hit its revenue

But they have pricing power because there is a fewer players in the industry

But they hit little by it

SEBI also directs to the NSE investment for the exit

So these restrictions can be a threat, but not in the present situation

The second threat is that because of the covid all the businesses are affected

So the mutual fund is an equity-based investment in which risk is very high, so in such a covid situation,

People can reduce the investment, but in the short term of time, this could be a threat,

Thirdly the whole business is market-linked, we know the equity markets have volatility,

So in the recessionary cycle, their business can be reduced,

The fourth threat is that the pledge of the promoter shares,

By chance the default in the loan in such cases, Due to the Pledge shares new investors have come

Here promoter is only an investment company that can be changed

Other than that in DMF people have started direct investment which can be a threat,

But it is not a threat because in DMF the broker commission is neglected,

But this back end handled process is a requirement of the whole mutual fund,

And their fees charge is an asset under management charged as a percentage

Now let's see the details of the IPO,

Here the price band is 1229 to 1230

It is a book built issue so we can apply a range between it,

So if we need to increase the IPO allotment chance, the price must a 1230 means upper band

The issue size is according to an upper band is 2244.33 crores,

It is offered for sale, not a fresh issue

Here NSE investment is selling its whole stack which means it will exit with money

The company will not get any money,

Here LOT size is 12 shares which are minimum to be allotted

Here minimum investment will be 14,760

And the maximum LOT can apply is 13 LOTS

The total maximum investment of it will be Rs.1,91,880

The offer will be open on 21 Sep 2020, to be applied

You can watch another video that shows how to apply in detail

The issue will be closed on 23 Sep 2021,

In the Demat account, the shares will come on 30 Sep 2020, and the listing will be on 1 Oct 2020

It is when we are going to trade it on BSE

It is listing only on BSE but not in NSE at presently

In conclusion, high interest can be seen and brokers are recommending it,

Because of high-interest listing gains can be seen in it

But in long term investment, you need to pay attention to our whole analysis

And do your detailed research

As we have talked if the company is fundamentally strong and you need to take a position in that for the long term

Then it is not necessary to apply only in IPO for the share, If you think for the long term you can buy it later also

So if you have any queries we will meet on Instagram live on Monday at 7:30 PM

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Till then keep learning, keep earning and be happy as always