CAMS IPO day 2: Public issue subscribed 94%, retail portion at 1.6 times

The public offer of Computer Age Management Services (CAMS), a technology-driven financial infrastructure and services provider to mutual funds and other financial institutions, has been subscribed 94 percent so far on September 22, which is the second day of bidding.

The Rs 2,244-crore IPO has received bids for 1.2 crore equity shares against offer size of 1.28 crore equity shares (excluding anchor book), the data available on exchanges showed.

The portion set aside for retail investors has seen 1.6 times subscription, while the reserved portion for qualified institutional buyers is subscribed 24.76 percent, non-institutional investors' at 32.3 percent and employee quota is subscribed 25.72 percent.

CAMS, the largest and end-to-end registrar and transfer (RTA) for mutual funds, with around 70 percent market share in-terms of average asset under management (AAUM) as of July 2020, has already raised Rs 667 crore via anchor investors on September 18.

The public issue is entirely an offer for sale of 1.82 crore shares by NSE Investments, the subsidiary of National Stock Exchange.

"CAMS provides a good investment option in the service provider space to the Mutual Fund, Insurance, AIF and other financial services industries. CAMS would be one-of-its-kinds stock with market leadership in the registrar & transfer agent (RTA) solutions space to the mutual fund industry (87 percent of revenue)," IDBI Capital said while recommending subscribe rating for the issue.

Also read: CAMS IPO issue opens: Should you subscribe?

"At an upper price band of Rs 1,230, the company is valued at 35x PE on FY20 EPS. Given the differentiated business model, strong growth opportunities and strong RoE/FCF profile we are positive on CAMS’s future growth prospects," the brokerage added.

This business has strong barriers-to-entry created by CAMS given its end-to-end solutions, in-house tech platforms and financial infrastructure. This has enabled it to deliver a superior RoE of over 30 percent over FY18-20 with a net-cash balance sheet, IDBI said.

CAMS services 4 out of the five largest mutual funds as well as 9 out of the 15 largest mutual funds based on AAUM as of July-20. It has successfully leveraged domain expertise, processes and infrastructure to cater to MFs, AIFs, insurance companies, banks and NBFCs.

"For future growth, while CAMS can continue to leverage its market leadership and client portfolio in the mutual fund space, Insurance repository services and services to AIFs can are still at the inflection point and can provide strong uptick to CAMS’s growth," IDBI Capital said.