CAMS - Indirect Bet on Financialization?

Chandragupta · June 5, 2024, 10:14am

“Moat” is a much misunderstood word in the investor community but here is a classic case of what one looks like:

The main challenge for any new mutual fund is how to attract investors, most of whom would already be investors in other mutual funds. You can have your website and mobile app but then the investor must need you really badly so as to specifically download your app and invest. CAMS services most of India’s largest mutual funds. The myCAMS app has more than 5 million downloads and allows one to invest in any mutual fund serviced by CAMS. So essentially the MF has a “captive” potential customer base even if those people have not invested in your schemes at present. No wonder CAMS won all the three new MF mandates who set up a mutual fund in India last year.

A classic case of what a “moat” looks like.

Meanwhile, CAMS had an almost goldilocks kind of a Q4, where everything came together and worked in their favour. Gross and PAT margins were among the highest in history, growth rates were strong across the board and cash flows (for the year) increased faster than the revenues. Overall company revenue grew about 25 %, MF revenues at 21 %, and non-MF at 38 %. (52 % including inorganic).

The non-MF businesses contribution to revenues has gone up to 13.5 % from 11, in line with the 2 % increase every year expected. AIF grew 24 %, CAMSPay grew 24 %. Management expects EBIDTA margins to be maintained at current levels going ahead as well.

During the year, CAMS won every single mutual fund mandate that decided to set up shop in the country.

GIFT City business is scaling up, with a larger office being set up and a larger team in place. Client size has gone up to 17.

Fintuple has become profitable at the EBIDTA level. Fintuple provides digital onboarding solution and integrates Custody, Clearing, Fund Accounting, Treasury & Forex services DIGITALLY under one roof

KRA grew a huge 30 % Q-o-Q and 90 % over the year with penetration in fintechs picking up dramatically. I had mentioned in one of my previous posts that the PayTM Payments Bank crisis will provide a good tailwind to CAMS KRA business. (See this)

Management says KRA, CAMS Pay and AIF will continue to propel the non MF business growth in immediate future.

Meanwhile, the mandatory demat of insurance is still awaited but IRDAI has taken one step forward mandating digital policy issuance. Mandatory policy demat will take time, I think.

Government has opened up Atal Pension Yojana servicing to more players, so CAMS will now participate in this as well.

Management says expense growth will remain in line with historical trends going ahead as well. Current headcount is 7800, annual increments are due in April and the company invests around Rs.7 crore per quarter in new platforms.

Non MF margins have crept up from 15 % in the past to 20 % now as the businesses scale up, but the steady state is close to 35 - 40 % in the long run so there is considerable scope for them to move upward.

(taken from Q4 FY24 concall transcript)

(Disc.: Invested)

suhagpatel · June 13, 2024, 6:43am

CAMS launches Bima Central. Those who are following the company may know that they have been talking about this for a long time. Now its officially launched. Those who already have an eIA with CAMSRep will get access to Bima Central for managing their policies of various insurers, with features such as simplified policy information, renewals & reminders, profile management of personal data and nominee information, policy calendar, and more. Those who want to open their new eInsurance Account (eIA) will be able to do so instantly on Bima Central after completing KYC.

SBI General, ICICI Prudential Life, Star Union Daichi Life, TATA AIA and Aditya Birla Health and many other insurers were involved in developing multiple use cases and helping to build Bima Central.

After IRDAI’s recent directive on electronic issuance as well as general
push towards digital technology, this is a step in right direction. Hopefully we will soon have eAI mandatory for insurance like we have demat for equity.

0da1c37c-8f11-490f-b87b-9b550161d4ee.pdf (bseindia.com)

Regards,
Suhag

chikspat · July 1, 2024, 11:46am

CAMS and Google Cloud are collaborating to build a next-generation platform for financial services in India’s asset management industry. The platform will leverage cloud-based architecture, AI, and automation, ensuring easy and secure transactions for investors. It aims to modernize CAMS’s existing infrastructure and enhance efficiency while complying with regulatory standards. The project will be developed over five years, with specific modules going live in phases.

D: Invested

Avigyan_Mitra · August 10, 2024, 6:47am

CAMS Q1 FY25 Analysis: Key takeaways!!

Business Outlook:

CAMS has delivered a strong performance in Q1 FY’25, with revenue growth of 26.8% and robust growth across its business segments.
The core mutual fund (MF) business grew 26.3%, while the non-MF segment recorded an impressive 30.7% growth, highlighting the company’s successful diversification strategy.
CAMS’ EBITDA grew by 36.6% and PAT by 41.8%, showcasing its operational efficiency and ability to manage costs effectively.

Strategic Initiatives:

The strategic partnership with Google Cloud to rebuild the RTA platform from the ground up is a transformative move that will enhance efficiency, accuracy, and risk mitigation, while also unlocking new business expansion opportunities.
CAMS is focused on scaling its non-MF businesses, with KRA, CAMSPay, Account Aggregator, and Insurance Rep segments all demonstrating strong growth momentum.
The company’s continued investments in talent, including hiring from top-tier institutions, underscore its commitment to innovation and future readiness.

Trends and Themes:

Mutual fund industry growth remains robust, with CAMS’ equity AUM market share reaching 66% and net inflows accounting for 70% of industry equity net inflows.
The rise in unique investor accounts and SIP registrations indicate increased retailization and a broadening investor base, favorable for CAMS’ long-term growth.
The growth in transaction volumes outpacing AUM growth highlights the company’s ability to capitalize on the industry’s digitalization and retailization trends.

Industry Tailwinds:

Continued growth in mutual fund AUM and net inflows, driven by rising household savings and increased retail participation.
Increasing adoption of digital and fintech solutions in the financial services industry, benefiting CAMS’ diversified service offerings.
Regulatory changes promoting financial inclusion and the growth of alternative investment funds, insurance, and account aggregator platforms.

Industry Headwinds:

Potential pressure on pricing and margins in the competitive alternative investments and insurance segments.
Challenges in scaling the insurance business due to the slower-than-expected integration of insurers on the Bima Central platform.

Analyst Concerns and Management Response:

Concerns around the impact of the cloud migration project on costs and margins were addressed by the management, who highlighted the long-term benefits and the flexibility it provides in managing costs.
The management remains confident in its ability to achieve the targeted 20% non-MF revenue contribution in the next 3-3.5 years, driven by the strong performance of segments like KRA, CAMSPay, and Account Aggregator.

Competitive Landscape:

CAMS maintains a strong market position in the MF RTA business, with a 66% equity AUM market share.
In the alternative investments and insurance segments, the company faces competition, but its established presence and technological capabilities provide a competitive edge.
The management is focused on further strengthening its non-MF offerings to drive growth and diversification.

Guidance and Outlook:

The management remains optimistic about the company’s growth prospects, with continued focus on scaling the non-MF businesses to achieve the targeted 20% revenue contribution.
The cloud migration project is expected to enhance operational efficiency and unlock new business opportunities, though the initial investment may have a modest impact on margins.
The strong growth in mutual fund AUM and net inflows, along with the diversification across non-MF segments, provide a solid foundation for CAMS’ future performance.

Capital Allocation Strategy:

CAMS continues to maintain a healthy cash position, with INR718 crores in cash and cash equivalents at the end of Q1 FY’25.
The company’s capital allocation priorities include strategic investments in technology, talent, and new business initiatives to drive long-term growth and shareholder value.

Opportunities & Risks:

Opportunities in the alternative investments, insurance, and fintech-enabled services segments provide avenues for further diversification and growth.
Risks include potential pricing pressure in competitive segments, challenges in scaling the insurance business, and the successful execution of the cloud migration project.

Regulatory Environment:

Regulatory changes promoting financial inclusion and the growth of alternative investment funds, insurance, and account aggregator platforms are favorable for CAMS’ diversified business model.
The company remains vigilant and adaptable to changes in the regulatory landscape.

Customer Sentiment:

CAMS’ strong technology capabilities, operational excellence, and diversified service offerings have contributed to its positive customer sentiment and helped it maintain its market leadership.
The strategic partnership with Google Cloud is likely to further enhance customer trust and confidence in the company’s ability to deliver cutting-edge solutions.

Top 3 Takeaways:

Diversified growth strategy: CAMS has successfully diversified its revenue streams, with the non-MF segment contributing 13.3% of total revenue and demonstrating strong growth potential.
Operational efficiency and cost management: The company’s ability to manage costs effectively, as evidenced by the 36.6% growth in EBITDA, underscores its operational excellence.
Transformative technology initiatives: The cloud migration project in partnership with Google Cloud is a strategic move that will enhance CAMS’ technological capabilities and unlock new business opportunities.

Jitendrapd94 · October 28, 2024, 4:39pm

Jitendrapd94 · October 29, 2024, 5:16pm

A Summary of CAMS Q2 FY25 Earnings Call

The provided source is a transcript of CAMS’ Q2 FY25 earnings call, where the company’s management discusses the financial performance and key business highlights for the quarter. Here’s a summary of the key takeaways:

Financial Performance:

CAMS reported strong financial performance in Q2 FY25, with overall revenue growing by 32.7% year-on-year to ₹365 crores.
MF revenue grew by 32.9% to ₹318 crores, driven by a significant increase in assets under management (AUM) and stable yields.
Non-MF revenue grew by 31.9% to ₹47 crores, demonstrating the success of the company’s diversification strategy.
Profitability also improved, with EBITDA margin reaching 46.9%, driven by operating leverage and cost optimization measures.
The board declared an interim dividend of ₹25 per share, including a special dividend of ₹10.5, reflecting the strong financial performance.

Key Business Highlights:

Mutual Fund Business:
- CAMS continued to dominate the MF RTA market with a market share of around 68%.
- The company added a record ₹5 lakh crores in AUM during the quarter, reaching a total AUM of ₹45 lakh crores.
- Equity AUM grew by 59.4%, significantly outpacing the industry growth rate.
- CAMS witnessed strong growth in SIP registrations and collections, indicating robust retail investor participation.
Non-MF Businesses:
- CAMS’ non-MF businesses, including CAMS K, CAMS Pay, Insurance, and Alternatives, continued to grow at a healthy pace.
- CAMS K: Achieved 56% year-on-year revenue growth, driven by the addition of 26 new fintech clients and expanding into non-MF segments.
- CAMS Pay: Revenue increased by 69% year-on-year, fueled by strong growth in UPI Autopay and the addition of new clients like LIC.
- Alternatives: Rebounded to 21% year-on-year revenue growth, driven by increased client signings and the successful launch of the WellServe digital platform.
- Insurance: Witnessed significant growth in e-policy issuances, with the company doubling its quarterly additions.
- Account Aggregator: Maintained a market share of 16.5%.
- NPS: Achieved 2.5x year-on-year growth and crossed 1 lakh subscribers.

Strategic Initiatives:

MF Central JV: The JV with other RTAs to create the MF Central platform is progressing, with the company expecting formal incorporation soon. The JV aims to expand the platform’s capabilities and create new revenue opportunities.
Fintech Expansion: CAMS is actively expanding its footprint in the fintech space through initiatives like the launch of Nexus for KYC dashboards, WhatsApp KYC, and the new NPS onboarding product from FinTupil.
Focus on Digital and Automation: The company continues to invest heavily in technology and automation to enhance its operational efficiency and maintain its competitive edge.

Management Outlook:

CAMS remains optimistic about its long-term growth prospects, driven by the continued growth of the Indian financial services industry and the increasing adoption of digital solutions.
The company expects its non-MF businesses to continue growing at a faster pace than the MF business, contributing 20% of total revenue by FY27.
While MF revenue growth may moderate in the coming quarters, CAMS expects to maintain healthy overall revenue growth through a combination of organic growth and strategic initiatives.

Key Takeaways from Q&A:

CAMS’ pricing model incorporates a telescopic structure, meaning yields adjust automatically based on AUM fluctuations.
The company acknowledges the potential impact of regulatory initiatives like the Unified Lending Interface on its account aggregator business.
CAMS is actively managing costs, with a focus on automation and optimization of variable expenses.
The company aims to maintain a stable EBITDA margin in the range of 47-48%, depending on future AUM growth and cost pressures.

The earnings call transcript provides a positive outlook for CAMS, highlighting its strong market position, successful diversification strategy, and commitment to innovation. However, the company faces challenges from increasing competition, regulatory changes, and potential market volatility.

Mohit_Jariwala · October 30, 2024, 3:21am

CAMS Q2 FY25 Earnings Call:

Division	Revenue Growth (YoY)	Key Highlights
Mutual Funds	32.9%	* Fastest quarterly AUM growth ever, adding nearly 5 lakh cr in a single quarter. * Equity assets grew 59.4%, exceeding industry growth of 53.5%. * Gained market share in equity AUM, reaching 66%. * Record high SIP registrations and strong retail participation.
Alternatives	21%	* Rebounded from a decline in the previous quarter. * Highest number of quarterly new mandates at 57. * Growth driven by new signings and adoption of digital solutions like the CAMS Serv 360 platform.
CAMS KRA	56%	* Expanded client base with 26 new fintech platforms added. * Strong growth attributed to increasing investor diversification, leading to multiple KYC registrations. * Launched new products, including a KYC dashboard and WhatsApp KYC, to enhance customer onboarding.
CAMS Insurance Repository	Not specified	* Added nearly 1 million e-policies in Q2, doubling the quarterly additions from the previous year. * Onboarded SBI General and ICICI Prudential as integrated insurers on the “Bima Central” platform.
CAMS Pay	69%	* Driven by growth in UPI AutoPay and recurring payments. * Added 23 new logos in Q2, including LIC for payment gateway services. * Increased adoption of CAMS Pay for MF SIPs and other recurring payments.
Account Aggregator	170%	* Holding a market share of 16.5%. * Revenue growth driven from a small base, but expected to scale up in the coming quarters. * Seeing some cannibalization from Algo 360 due to overlap with the account aggregator model.
NPS	2.5x	* Crossed 1 lakh subscribers and maintained its position as the second-largest eNPS player. * Partnered with Indian Bank for onboarding eNPS customers.
MF Central	Not specified	* Revenue of 1.7 crores in the current quarter, split equally between CAMS and KFintech. * Formation of a JV with KFintech to further develop the platform and expand its capabilities, including facilitating financial transactions like loans against mutual funds.
Think 360	Revenue Decline	* Experienced revenue decline due to cannibalization from the account aggregator business. * Some US analytics contracts came to an end, contributing to the decline.

Overall, the sources highlight strong growth across most of CAMS’ divisions. While MF revenue growth is expected to moderate, the non-MF businesses are poised for continued expansion, contributing to the company’s revenue diversification strategy.

ripzc09 · January 21, 2025, 5:38pm

CAMS Has Been Selected As The Registrar And Transfer Agent (RTA) Of Proposed Jio Blackrock Mutual Fund (
https://www.bseindia.com/stockinfo/AnnPdfOpen.aspx?Pname=5b7f1c43-18a8-4f08-a3dc-c17674ab6239.pdf )

ripzc09 · January 23, 2025, 2:03pm

since Kfintech’s thread is locked, posting the summarized results here

this makes me hopeful that CAMS can also give great set of numbers on 29th Jan

babu44b · January 27, 2025, 6:36am

Hi,

Thanks for summarizing the growth of other divisions apart from MF. The non-MF revenue was12.9% of the total revenue for the last quarter and as per management non MF revenue to grow in mid-high twenties, going forward. So the transition will take much more time to even go near the MF revenue figures, With CDSL results out, there is an expectation that MF revenue growth rate will taper down from next quarter onwards. Though I will love to be wrong here!

Disclaimer: Invested in the stock, so views may be biased, Not a buy sell recommendation.

Thanks,
Deb

Arka · January 29, 2025, 11:02am

CAMS Services | Financial Results

CAMS Services | DIvidend Declaration

ripzc09 · January 29, 2025, 1:25pm

good set of numbers in a tough quarter

Naman_Gupta1 · January 29, 2025, 3:52pm

Well, this quarter numbers will be reflected next quarter, and it’ll be interesting to see then how it performs. CDSL, CAMS, any AMC is linked to the market and the reaction we see in stock price dipping is due to the market for seeing that coming quarter won’t we as rosy as they were till now.

Siddharth_Thakor · February 3, 2025, 11:34pm

CAMS is down from 60 PE to 38 PE. As a shallow cyclical industry do you think its a good time to accumulate it?

I was going through their Feb’ 25 transcript. CAMS won 3 AMC’s contract, Jio BlackRock, Choice and Panthomath. They also won first international AMC CeyBank to handle their Indian Clients. Secondly they also won 1 contract with an Insurance company. Also, management said one of the player came in from KFin (I think its Navi MF) to CAMS.

One negative (not so negative), management said they recently renewed the contract with 1-2 AMCs and there was a yield decline. However, management said that it won’t effect much, but they will be able to tell once the prices are decided.

One Positive, they are building their non-MF portfolio, where they are multiple platforms to be used by different companies (fin companies), platforms like KYC, Payments, and KRS.

One question that I liked in the transcript was from Nuvama Wealth asking something like, “why did the MF migrated from Kfin to CAMS, is it because of pricing, quality, or the services that CAMS provide?”
“The management commented that, we always charge a premium to the customers, our pricing is more than KFin, its because of the quality and number of services we provide and our platforms are very robust.”

What I felt at first was:

Their yield declined, however, they already said if the AUM reach certain amount, the yields are likely to decline. And also said if they can’t charge different to MFs, the prices for all the MFs are similar and depends on different services and AUM numbers - I felt that CAMS don’t have pricing power over MFs. But then the management said that, we are more expensive the KFin. Could someone explain, about Pricing Power in case of CAMS.
They are focusing on non-MFs platforms. I felt that a good use of the cash flow they are generating.

Thank you, I will add more if I come across anything new.

suhagpatel · February 4, 2025, 5:02pm

It was not a bid to win the international client. It was more like that client came to CAMS and they decided to service them. They are still not targeting any international AMCs and they do not have any sales team for that. Business wise also this AMC is not very big.

CAMS do not charge any premium to any AMC which migrates from competition. What CMD said is, they do not target any competition with cheap pricing, in fact its against their policies as it will be unfair to their existing clients if they charge cheaply to anyone coming from competition. For the incoming AMC, they will charge it more than what Kfin used to charge. And no, its not Navi. Navi is already migrated to CAMS sometime back. Also, shifting RTA is not a common practice in MF industry. Its rare.

As far as valuations are concerned, yes they have cooled off with markets. CAMS’s fortune are connected with capital markets be it MF inflow, KYC, Payments etc. If the market remains sideways for a longer time, it will reflect in CAMS number in coming quarters and that is what market is discounting currently.

Siddharth_Thakor · February 4, 2025, 11:24pm

I have something to discuss, I’m already holding CAMS from lower levels. But I don’t want to be biased on it. Just simple, we can discuss about it.
Some points:

I have seen that CAMS charges on per transaction, there was a table given which shows that their value decreases as the AUM increases. Does it shows that CAMS is a price taker rather than Price giver?
Obv, CAMS charges are govern by SEBI. CAMS itself can’t increase prices and doesn’t have pricing power. Am I right?
One positive point I felt was, they are entering non-MF markets, can anyone tell about the competition they face in their non-MF platform, because the management said they make around 15% EBITDA on their non-MF side.

It is market driven business being shallow cyclical in nature.

Please comment and correct me if I’m wrong.

suhagpatel · February 5, 2025, 5:09am

Answer to all your queries are there in their last 4 quarterly concall transcripts. You will get to know much better about the business after reading them.

Mohit_Jariwala · February 5, 2025, 10:28am

I think the main reason for the price fall from ATH is low revenue growth from the previous quarter

Chandragupta · February 5, 2025, 3:33pm

CAMS is a high beta stock, and one can take it almost as a leveraged bet on the index.

CAMS listed in Oct 2020. Since then, it rose 212 % from Rs.1265 in Nov 2020 to Rs.3960 on 1st Sep 2021. It then fell almost 50 % to Rs.2075 in the next 9 months by May 2022. After wobbling around for another 10 months, it bottomed out at Rs.2015 on 28-Mar-2023. Thereafter, it rose 2.5 X in the next 21 months to cross Rs.5,200 and has been falling since then again to its current level.

These movements are almost in line with the broader markets, which peaked in Oct 2021 (CAMS peak Sep 2021) and made a low 8 months later in June 2022 (CAMS near low May 2022). But it was only from March 2023 that a strong rally began (CAMS rally also from March 2023) which ended recently in Sep / Oct 2024.

However, throughout this period CAMS’ earnings remained steady, with just two quarters of minor declines in Q4FY22 and Q1 FY23. After that, the earnings grew again.

This time also we can expect similar thing to happen. First there was a sharp fall in-line with the market. Then another sell-off happened after the results, when the management said a couple of contracts will be repriced lower next year. The earnings growth may pause or show small declines for a few quarters. But the stock will have nothing to do with it – it will move in tandem with the market. If and when the markets reverse direction, the stock will do the same.

When that happens however, is anybody’s guess.

(Disc.: Invested)

Sudhakar_Subramanian · February 6, 2025, 3:12am

Is it not 1.6X like in the graph than a 2.5X?
Excellent post by the way, correlating CAMS with the index.

Hopefully if the rumoured rate cuts start, this could happen.