Can some one please help with my query - as I understand the account ultimately sits with the depositories. So moving a MF account to demat form doesn’t affect CAMS right? Or I am getting the picture wrong?
If a material/physical unit sits with the RTA would there be any reason for the demat unit to be transferred to cdsl/nsdl?
@Chandragupta sir would love to hear you POV. Thanks
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With promoter entity continuously offloading the stake in CAMS
It will soon be a professionally managed company with no promoters.
Is it good for the company
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PE investors have an obligation to their fund investors and hence they exit from their investments frequently. This business has a very long runway for growth. Our total public savings penetration in the equity markets is the lowest as compared to other economies. i am accumulating this stock.
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IRDAI mandates All insurance policies in Demat form from Dec 2022.
The beneficiaries are CDSL, NSDL, CAMs & Karvy.
CAMS has a subsidiary which is fully involved in Insurance repositories and currently they already have 40 Insurance companies as their clients.
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However the problem is that LIC has refused to participate in Dematerialization till now. I have an insurance account but couldn’t get my LIC policies there and it defeated the whole purpose of opening that eIA account. Hope things change now.
The net asset under management (AUM) of the mutual fund industry in August was at an all-time high at Rs 39.33 lakh crores while the mutual fund folios crossed an all-time high at 13.64 crores. The retail mutual fund folios also were at an all-time high at 10.89 crores in August.
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LIC apparently has decided to step us its own Demat platform similar to CAMS.
The insurance Dematization is a good trigger for next leg of growth, but I am not sure how much of it can CAMS get…
LIC - have proposed to setup its own depository. This should not be allowed. Then there is no meaning of having centralised depository. Tomorrow each and every insurance company will come up and setup their own depository…
Insurance by banks - most of the other insurance products are sold by banks. So they would probably choose their own depository partner (NSDL in most cases) for dematerialising…
I don’t know if miss something here. Any experts can clarify my doubt. Because if CAMS does capture market share in insurance. It can easily double their income…
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Hi All,
After going through latest annual report of CAMS and also this entire thread, I have captured few observations:
- In general, CAMS business model looks cyclic to me. When broader markets corrected during 2018 & 2019, Sales and PAT were impacted to some extent. The growth in Sales and PAT was lower in FY19 and FY20.
- Though number of folios (and investors) will continue to go up over next few years, it is possible that, AAUM might drop if there is substantial market correction. There could be prolonged period where equity markets can remain stagnant. In those cases, Sales growth can slow down. It does not look like a Secular growth story to me, though long term growth in MF industry will be there.
- I have not seen much momentum in MF Central initiative where CAMS and KFINTECH were supposed to give seamless MF transaction platform to retail investors. If that would happen, then there could be more investors using MF Central and they may prefer investing in direct plans. Though this will not give any benefit to CAMS, but its visibility may increase.
- SEBI may keep regulating the expense ratio over next decade, in that case, transaction and processing fees charged by CAMS may reduce, thus reducing its margins. PAT growth may slow down as compared to past decade.
- Due to points mentioned above, CAMS may need to look at new revenue models as MF industry matures in India. Though Non MF revenue contribution is growing but need to become more significant to make it more robust business model.
- Majority of Revenue comes from Equity MF whereas Debt MF seems to be contributing very less. With RBI Retail Direct site, some HNI investors may invest in GOI bonds directly impacting growth in Debt Fund AUM to some extent. This may in turn impact CAMS revenues from Debt MF business. The impact could be very low.
Overall, it looks good high quality business for an investment, but valuations could be under pressure going forward. I may be wrong in my analysis.
Disc: Under watch list.
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Mutual fund industry is going to mature , well there is long way to go.
Regarding valuations , it is duopoly so it will have some premium.
If anyone has long term view, once should make decent money.
CAMS is smartly venturing into non MF business like eKYC, insurance repository, Account aggregator, AIF & PMS through Fintuple acquisition ( PMS will always charge high expense ratio which could not come down soon as it is the case through out the world)
I am eagerly looking out how account aggregator will workout for them. If they can get it right. It can become 2nd revenue contributor to them next to MF…
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Equity mutual fund inflow doubles to Rs 14,000 crore in September.The net AUM as of Sept, 2022 is tabulated at the end of the article .
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Kfin tech considering an IPO.
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Digitisation of insurance policies and depository for the same is being touted as the next big frontier for fintech. Currently all insurance companies send you a soft copy of the insurance policy, whether health, life or motor. And you can store them on your computer. Insurance policies are not ‘transactionable’ unlike say shares. So I don’t really see any big benefit in having an insurance depository for a policy holder. Perhaps the govt wants to centralise it in one place for the benefit of a lender/ service provider. As such I do not see any large monetary opportunity in insurance for CAMS. Am I missing something here?
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With digitization of insurance, CAMS (& three other licensees - NSDL, CDSL & Karvy) will do the following activities for the insurance companies:
- KYC (which will become mandatory as part of this change)
- Opening of insurance demat account
- Holding policy in demat mode
- Conversion of physical into digital (for existing policies)
- Digital assignment of policy (for loan against insurance)
- Premium collection, sending reminders, lodging of claims etc.
- Management of life cycle of claims against the policy wherever applicable
- Customer data management such as change of address, phone numbers, email ids, nomination etc.
Thus, CAMS will become an outsourcing BPO for insurance company back office, plus it will do some other new activities which will come in due to this change. For each of this activity, CAMS will presumably charge something.
There are 30 crore life insurance and 20 crore general insurance policies in existence today. So there may be something like 250 crore “transactions” (i.e. actions) in aggregate originating from them – assuming 5 actions per policy (from the list given above). At Rs.1 per action, the total revenue pool from this comes to Rs.250 crore per annum, which will be shared between CAMS and three other licensees. At 25% market share, CAMS revenue will be Rs. 60 - 65 crore. This is just a very rough back of the envelop calculation, take it with a pinch of salt!
You are right in that insurance is not a transaction oriented business like shares. Nothing is simpler than a PDF I generate after buying my policy online. What more do we want? Personally, I am skeptical of how much all this will really benefit individual consumers in aggregate.
But it presumably will make ‘management’ of the business at a macro level easier, benefitting IRDAI & the insurance companies. I think that’s why this whole thing is being done.
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I would like to know, if digitization of all insurance products like Life Insurance, Health Insurance, Vehicle Insurance has happened in developed nations and if it has happened, what are the learning from those developed nations?
Generally I have observed that, such trends and practices generally start from developed nations and then we see similar trends in India as well. So some insights from developed nations may help here.
Also, I am curious to know, if any one has researched about KYC practices in developed nations. Do they require customers to update KYC periodically as we are doing for Bank KYC, MF KYC, Locker KYC, Demat KYC, and various other such KYC processes? I believe that, all these KYC updates consume some money and entities like CAMS might be gaining some transaction fees out of it. I may be wrong.
But, if such practices and frequency of KYC updates keep going up in future, will it be a positive for CAMS? Will it have positive impact on its revenues earned through such transactions?
Disc : No investment in CAMS.
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I read this discussion about insurance digitisation with great interest.
Just sharing something similar which happened with another platform firm.
Not so in distant past, digitisation of acedemic credentials was touted to be the next big thing for only listed depositary. The company was already working on it and number of universities were being counted.
Ultimately, government decided to go via digilocker rather than depositary route. And, it was the end.
Betting on favourable government policy decision and counting its benefits seem too premature at this juncture.
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We have two insurance depositories active today…I opened an account with ‘NSDL NIR’ back in 2017 with great enthusiasm but the experience was under whelming. Here is what my experience is,
- LIC doesn’t participate. This defeated the whole purpose in my opinion. the true consolidation didn’t happen.
- General insurance policies like mediclaim, etc. didn’t get dematerialized. Again defeating the whole purpose.
- That leaves only private insurers in the NSEL account and here too, my Aditya Birla Policy that I terminated around 4 years back is still shown as ‘Active’ in my NSel account and also in CAS. The data is not synched.
If CAMS can do what NSE / CDSL couldn’t, then it is a promise but otherwise this is a non starter. Also, LIC has declared recently that it will have its own depository. So again, future continues to remain uncertain.
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The reason the idea has not picked up is because the benefits to the consumer are not very apparent. The concept will grow only when there is push from the regulator. CAMS says that push is coming now.
In any case, making the idea successful is not CAMS’ responsibility. Their strategy is to put a foot in every piece of the financial ecosystem. Whatever works will be nurtured. Whatever doesn’t work will be discarded (or at least deprioritized). That is the optionality here.
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