CAMS - Indirect Bet on Financialization?

Few queries …

  1. Who is the RTA for MF in developed countries like US. Do they have something of similar sort ?

  2. A look at the fees shows a reducing trend. While volume may increase but with reducing fees I would be interested to know the growth rate you applied in your DCF.

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Very good Analysis Rohit, everyone more or less are talking about entry barriers and the nearest competitor is Karvy which has it’s own set of problems.

I don’t see any attention (please correct me if I am wrong) given to their technology they are feature rich; starting from eKYC, UPI Integration, Digitial SIP etc… but their tools and interfaces are very outdated and most of the time buggy, they don’t work on all the browsers, their login security is so complex (security rich but not user friendly) .

Let us compare ICICI Direct vs Zerodha

Compare start from their websites (ICICI vs Kite), later is light weight and user friendly, being market leader ICICI taken for granted and they never saw the threat of discounted brokers.
If we start such comparisons modern day websites, web applications are simple light weight and appealing to users.

I am sure CAMS has robust technology frameworks, no doubt about that, volumes speak for themselves. But being an outsider we can’t say they are resilient, if a SIP transaction fails to execute they still have time to recover and process. I myself experienced many times the transactions placed before COT are not processed and the units are allotted day after the actual allotment date.

We have come long away from client server model , distributed computing , now the trend is edge computing

Read this blog on zerodha tech. journey, they are number 1 not because they are discounted brokers, because of simple interfaces. I am sure their nearest competitors UpStox and all also equally good may be better than zerodha

Like any other hardware even software has use by date, one has to innovate and invest in their systems to upgrade with next generation technologies.

Disc : Not Invested, still learning from all the great minds here


Comparing with other business was not the only way of valuing CAMS, just one of the inputs into looking at it. I have personally also used a detailed DCF for my own analysis.

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I did comment on this in my note: Here is an excerpt:

  1. Does CAMS have pricing power? CAMS pricing structure is tiered which means that fees drop as AUMs serviced scale up. This is why CAMS revenue growth can trail AUM growth for AMCs over the longer term. However, remember that CAMS has high operating leverage which means that even as % fees drop, absolute higher incremental sales flow through the bottom line better due to operating leverage. Essentially, this means that earnings growth and ROCEs for CAMS can actually inch up even as % fees charged on AUM trails down. One needs to be cognizant that with CAMS now being the sole efficient and dominant RTA, CAMS interests are well aligned with their MF client’s interests. A healthy CAMS will make sure systems are tight and ever improving which benefits the entire ecosystem. Lastly, one has to also realise that CAMS fees of 5bps is a very small fraction of the total expense ratios of mutual funds. So as long as CAMS is doing a good job, they are the last ones MFs will come after to squeeze out some pennies. The simple analogy I can give here is of Fevicol – if you want to cut your interior decoration budget, you would not think of replacing Fevicol with a cheaper adhesive. Simply because, Fevicol does a good job and constitutes a very small cost of the overall furniture making cost. There is obviously a risk that if SEBI caps or keeps cutting down expense ratios, CAMS will also be expected to oblige. But this is a risk even to the AMCs themselves.

Thanks for the kind words of appreciation on my note.

You raise very valid points in the sense that CAMS is weak in terms of customer UX.

The majority of CAMS business is around the being the back-end operational an technology backbone of AMCs. So whether you start a new mutual fund SIP from any of the new online platforms, AMC websites, CAMS UX (which I take your point is not well designed) or any of the physical branches of CAMS or the AMC - the back end processor is always CAMS. This is their main business and there is no competitor here except Karvy who does this. And we know from a 20 year history that this is indeed a very profitable operation and has survived quite a bit of technology changes already.

CAMS few years back has entered into working distributors and started direct platforms for investors like you and me. On the investor side is where you make the point that their UX needs a lot of improvement. But this is a very small part of their business and does not explicitly contribute anything to profits. AMCs pay them for back end processing and not for such origination. Having said that, I agree that if you are doing something new, you should make a good effort at it and not a shoddy one.

To draw a simpler analogy, its like TCS which is the tech backbone of the worlds largest banks and retailers but perhaps a lot of start up companies would outdo TCS in designing a customer facing app.


you did not replied on comparative analysis ? Who is the RTA for US / developed countries MF or they have some other mechanism ?

in case you are aware ?

No I am not aware of the specifics. However I recollect from the book sighted in my article and from CAMS mgmt interviews/investor calls that in other markets there are varied entities offering CAMS type work on a piecemeal basis. There are RTAs, banks and other BPO type service providers who do this. In some markets, these things are done in-house as well.

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Three key moats of the CAMS business:

  1. Ability to understand regulation and then build a process and execution around that
  2. Bespoke in-house platform - it has taken about two-and-a-half decades to bring the entire platform to the current level. There are no commercial sellers in India of that kind of platform. There are commercial sellers overseas but porting that platform to the needs of the Indian market is extremely tough, cumbersome, and cruddy. Some people have tried that, and it has not been successful.
  3. Infrastructure - Physical (270+ branches) and electronic (linkages with AMCs, registered distributors, payment aggregators, stock exchanges, etc.)

Per Management, RTA license is not really a moat.

Disc: Invested


CAMS hosting a series of meetings with some top institutional investors later this month.

Hi @Rohit_Kadam ,

Industry AUM for Sep 20 was 26.9tn vs 24.6tn (Sep 19). But Revenue didn’t grow. (162 Cr for Sep20 Quarter from 164 Cr for Sep 19 Quarter). This could be because of lower fees percentage? isn’t it unfavourable that even after Industry AUM increment, the company couldn’t increase sales?

Apologies if the doubt is very basic, I am a newbie. many thanks in advance


Pls refer to their Sep 20 results presentation and call (transcript available on research bytes). Will be very informative since you are new to the business. Thanks.

hello @hrdk3110

I too was flummoxed with this anomaly. Even with the lower fee percentages the sales should improve I guess but it decreased. Did you get a possible explanation???

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It’s pretty simple i guess, pls correct if wrong. Looks like AUM mostly increased because of increase in holdings of existing market participants rather than new additions or new SIPs/transactions etc. This was because of markets reaching new heights from the lows. Could it be that CAMS gets more incentives on new people participating like a new folio addition, new SIPs, more transactions etc and not that much as existing ones AUM increasing? Typical of KYC/transaction handling business as after all it is not an AMC managing the AUM so it’s revenues should depend on how and means of the increase in AUM rather than on AUM itself? Thanks


Can someone put the link for Investor Relations & Financials page of CAMS. Can’t find its annual report anywhere.

AUM increase was mainly due to increase in Debt funds which has a lower fee structure than equity. This explains despite AUM increase, revenue remained stagnant or slightly lower.


Sujay, is this what you are looking for ?

Also the latest report from CAMS_Initiating Coverage_HDFC Securities_Nov 2020.pdf (1.5 MB)


Thanks. I was looking for the dedicated section for financials / shareholders on the CAMS site.

For example:


Also, doesn’t CAMS have any published annual reports so far? Usually companies filing for IPO have at-least 2 years of AR published and uploaded to the website. I can find info from the DRHP though.

Hi Sujay

Here you go

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This is correct. Also the paper based transactions (where they earn higher fees as costs incurred are also higher) were substantially lower over the last two quarters as few people visited their 271+ physical branches to do any kind of new requests or processing of existing folios. This point was also clearly mentioned on the 2Q call. This piece will gradually recover over the next two quarters.


Q2FY21 CCT Notes

AUM serviced and funds 19.4 Tn/ Lac Cr. 70% MS. Serviced AUM 18.4 Tn.

40 mn live investors. 4 cr.

unique investors 16.2 mn 1.6cr.

Franklin Templeton

Had LOI from FT in March, signed contract in July, migration to our platform should finish by end this FY.

So, Franklin was doing this work in house. They have done this work in house globally as a philosophy. That is what they believed in many years. They have been a make company themselves, not a buy company. And if you saw the 40 mutual funds in India, we would have described it as 100% outsourced but for Franklin. Now it has become a 100% outsourced market. So, they are not stepping out of a commercial relationship they had with a third party. They are stepping out of a philosophical position of doing themselves. When they decide to do it themselves, they had to do a discovery in India. And that is how they chanced upon us. So, the migration is happening from Franklin’s own RTA operations.

So, let me start by telling you that a mutual fund in RTA operation is, is just a very deep kind of a relationship encompassing, literally, if you were to account hundreds of activities that get done across the sphere of liability side operations. And therefore, it is a cumbersome model for anyone to deal with two RTA operations. So, the migration is a one-shot wholesale lock stock and barrel migration, which means everything moves on the same day, so it is not incremental. And therefore, all the assets and all the accounts, all the folios come to us. And therefore, the entire AAuM accountability and the attendant revenue and responsibility is all ours. That happens from day one. It is not incrementally that they will do something, and we will do something else. It almost – that is one. The second thing is, and I do not think I can give you specifics. But let me tell you this, that we have built over the last many decades painstakingly very compliant quality, delivery, high investor set, low complaints, high, ironclad kind of operations, that kind of image. And therefore, we are seen as the premium provider, which is how the market share is justified, not through pricing. I would say there is just one word for it, which is performance. Sustained performance has led to the market share


myCAMS txn grew 34% QoQ. Edge360 launcehd in AUG-19, a distributor platform, offers services to intermediaries to come and transact grew 38% QoQ.

GoCorp, platform for liquid and overnight funds, used by corporates, grew MS in Txn from 19% to 23%.

And my final question was, you know, I just wanted to clarify what I heard to some previous questions’ response, was typically we’ve grown at point .75x of the industry AAuM growth when it comes to our asset based revenues. And the second piece of that answer was, you know, given our investments that we do in digital and human resources, it’s fair to assume the margins at EBITDA levels stayed around that long term 37, 38%, instead of looking to expand those margins as long as the industry is growing. So, clarification on that.

Yes you are right.


89% of rev. from MF. 80% of MF rev. is from asset based fee. Cannot give rev of individual business.

Pricing is tiered, when AUM grows fee% reduces.

So, the way it works is that the tiered structure is largely a static structure, which is agreed to at the time when we are signing up for the customer. However, there is a possibility that if the customer grows very large, then it is possible that we may do a structural conversation on any further tiering that may happen.

Paper txn are revenue yielding for us. However they are not a large source of profit as they are priced at cost + little margin.


We will keep needing investments to improve.

We will keep needing the physical infra as additional investors from smaller cities prefer physical access.

We will invest in tech CAPEX and physical CAPEX, but payout 65%.


Charge higher fee, still higher MS?

Sure. Good question. And, you know, as you gain intimacy with the business, Dushyant, over a period, you will kind of realize this better. But if I were to sum it up, it is not the license, which serves as the differentiator. There are two, three parts to this entire construct. One is like, it is a very nuanced, multilayered, detailed, complex understanding of process and regulation both. Now, that sounds like a line of English. But when you start practicing it, it is what it is. And I come from a background of outsourcing and multiple industries. And I have seen including England, India, and overseas, including healthcare, airlines, telecom, all of that. And this is extremely nuanced and multilayered. And therefore, the base of knowledge and the base of processing that we built over the last many years, and this entire workforce is a large asset, and our ability to kind of understand regulation and then build a process and execution around that. And the second, the biggest part of this is the platform, because the platform is what the business gets done on. And like you know, all the components of the platform, whether it is for processing or data keeping, long-term record keeping, brokerage computation, all of those things are being done on our central platform. That is the IP – it has taken us about two-and-a-half decades to bring that entire platform to the current level. There are no commercial sellers in India of that kind of platform. There are commercial sellers overseas but porting that platform to the needs of the Indian market is extremely tough, cumbersome, and cruddy. And some people have tried that, and it has not been successful. So, the successful RTAs that you see today have both ridden on bespoke own platforms over the last the last two, three decades. And then the third, of course, is that we have created this vast financial infrastructure, both physical and electronic. The physical infrastructure is the network of 270, branches, the 1500 people who work there, service, investors, and distributors, and the electronic infrastructure is all the linkages that we’ve created with all the other constituents, like the AMCs, the 100,000 registered distributors, payment aggregators, stock exchanges, all of those. So, if you put these three components, that is really what I would classify as the, the build, the IP part of the business, which is tough to replicate. I would not think of the license as the key component of the secret sauce.


Yeah. So, think of the marketplace as any other large B2B outsourcing marketplace, just in terms of the process. So, the way the process would work is FT is an example, but there are multiple mutual funds that typically wanted to get, which get licensed every year. They have to appoint some of these outsource partners because the industry has successfully kind of chosen that path. So, amongst the custodians, fund accountants and RTAs, bankers, the mutual fund will typically do a discovery process through an RFI or an RFP. They will invite competitive bids. They will do the site inspections etc., do client references, and at the end it is the capability and price kind of a win strategy. So that is how the entire process takes place. The contract is a perpetual contract. Just because it is almost a tied relationship, it does not mean that the client can’t move away from the RTA. But those moments are less than what you will see in other industries. So, these are long term, almost perpetual contracts with the ability to add scope as you need. So, whenever there is a regulatory change, or you want to do a service innovation, you can add scope to it. And the other thing is that there is a mechanism to kind of discuss price, which comes up every three, every four, every five years. So that is typically the mechanism, which is available, not very different to any other B2B contracting that you would see in the outsourcing space.


SIP success rate (SIP activated vs money added) used to be high 90s before COVID. Fallen now. Should get back in somtime.

Loan against MF

Used to be paper based before and used to take a week. Now can be done online in 5 mins.

Now, because this expands the amount of activity that we do digitally and also, there are embellishments that we supply to the banks in terms of various reports and intelligence on their overall portfolio, there is a small rupee fee that we charge on every registration, which means, not the registration of a customer, but on the actual lien marking process, and then we charge a rupee fee when the on marking happens, which means when the person is paid off and then the lien marking goes away. So, these are small rupee fee numbers that play out, and this market is just kind of beginning to happen. It is a few thousand cases a month kind of a marketplace right now.

Pricing Power

SEBI reducing TER

Largely since our approach to the market has been a more collaborative partnering inside the arena approach, we have never let the market share manifest. Some of the scale of the growth continues to go to the mutual funds, which is why revenue growth is at a lag to the asset growth and not exactly equal to it. In a year when TER went down, and the entire industry was impacted, although I must start by telling you that most of that impact was either absorbed by the mutual funds or passed on to other components of the industry, some of the mutual funds did come back to us and had conversations on price. Those are, again, one-on-one conversations on what we can do in a tough year when they are facing headwinds. And then those conversations get concluded through some, some arrangement that we would enter. All of that is in the past because that happened last year. And we are about six quarters out of the time when the TER change happened in April of 2019. But yes, occasionally, in an exception earlier, that may happen.