Meta Finance

CAMS Fundamental
Analysis
Super 20

Image Placeholder
 Our Agenda

01 Introduction

02 Business Overview

03 Financial Overview

04 Key Highlights

05 Our Take

Business Plan 2
Introduction

Image Placeholder
 Company Introduction

Incorporated in 1988, Computer Age Headquartered in Chennai, CAMS

Management Services (CAMS) is a has a pan-India network of service
technology-driven financial centers & digital connects
infrastructure & services provider designed to cater to the evolving
to mutual funds, insurance and complex needs of diverse

providers and alternative clients.

investments funds (AIF)

Business Plan 4
 Share Price Overview

Business Plan 5
 Share Price Today 29/09

Business Plan 6
 Company Timeline

Business Plan 7
 Share Holding Information

Business Plan 8
 Company Overview

Business Plan 9
 Top Client base in MF

Aditya Birla Sun Life Kotak Mutual Fund

Mutual Fund 1 2

HDFC Mutual Fund ICICI Prudential Mutual

3 4 Fund

5 6
Tata Mutual Fund
SBI Mutual Fund

Business Plan 10
 Growth

Business Plan 11
Business Overview

Image Placeholder
 What exactly is the work of CAMS?

Investors in mutual funds do multiple transactions on any given working day such as buy, sell, switch units, request bank to
change their residential address or email.

The Mutual fund House has to maintain records of such transactions. The mutual fund house’s core business is to build
investment portfolio, market them to get more and more investors, and manage investor's money. Maintaining the transaction record
and generating a report is not their core business.

Hence, they delegate this task of report maintenance, data management, report generation, etc. Most mutual fund houses prefer
to outsource this work to an agency that can handle these requests from investors on a regular basis.

This is done by the RTA agent on behalf of the mutual fund house. So CAMS is the biggest RTA, i.e it provides support to more
than 70% AUM of the Indian mutual fund industry. For all these services, CAMS charges fixed fee as % of the AAUM of AMCs.
Fees charged for equity funds are higher than those charged for debt funds. Fees are charged based on the size of the AUM (assets
under management).

Although 90% of revenue comes from RTA roll, where it charges a fee to AMCs for managing the records, CAMS earns maximum
fees from managing the equity fund and least from managing the ETFs or index fund. It is also a technology-driven financial
infrastructure service solution provider to alternate investment funds, insurance companies, banks, and non-banking financial
companies.

Business Plan 13
 CAMS Core Product Portfolio

Business Plan 14
 CAMS other Product Portfolio

Business Plan 15
 Overview of other Services

Business Plan 16
 Overview of other Services

Business Plan 17
 Overview of other Services

Business Plan 18
Business Plan 19
Financial Overview

Image Placeholder
 Financial Overview

Business Plan 21
 Financial Overview

Business Plan 22
 Switching costs : Over the years, MF
heavily depend on CAMS for their dealings
with investors, distributors, payment
processing, KYC & other compliance related
tasks. CAMS has not disappointed and
relationship with its top 10 MF clients has
averaged almost two decades (customer
retention high)

Even if a client decides to switch to another

RTA, there are very high switching costs as
the entire backbone of the operations is so
intertwined with the RTA. There is a risk of
many things going wrong from cyber security,
poor customer experience, loss of data etc.

Unlike IT services, where the customer

typically works with 4-5 vendors on different
projects, CAMS is the sole RTA offering end
to end services to its clients. That only
escalates potential switching costs.

Customer stickiness is thus expected to be

very high in this business.

Business Plan 23
 Financial Overview

Business Plan 24
 Rising trend and consistency.
> 20% long term are considered
good.

Business Plan 25
 Rising trend so +ve

Business Plan 26
Rising trend so +ve.

Positive numbers and rising

over time.
 Deep down in Balance Sheet

Business Plan 28
 Financial Overview

Business Plan 29
Business Plan 30
Business Plan 31
Key Highlights

Image Placeholder
 Competitive Strength

Scalable technology-enabled Market Leadership PAN India presence Economies of scale making it
ecosystem low-cost leader

Its proprietary technology CAMS is the market leader in CAMS has a network of CAMS rising market share &
platform that is highly scalable. the RTA business with a 70% 271 service centers best in class operational
For example, in 2015 handled market cap, which gives them a spread across 25 states. systems has made it the most
98 million transactions & in strong competitive advantage. This provides a efficient RTA. This is now a
2020 handled 323 million
The most interesting part is competitive edge in virtuous circle – as CAMS gets
transactions, look at the huge
that this business would terms of strong larger versus the number 2
rise in transactions, their
continue to grow at a very distribution. player, its unit costs keep
platform is highly scalable to
good rate as mutual fund reducing enabling it to offer
handle huge volumes in future
sector is under-penetrated in the best priced services and
that gives them a strong
India. yet remain very profitable.
competitive advantage.

01 02 03 04

Business Plan 33
Business Plan 34
 Why CAMS can have bright future?

01 Fastest growing economy in

the world

02 Digital economy

03 Investment shift from traditional instruments to the

Indian economy ( Financial Literacy)

04 Rising income & Easy of investment

Various products catering to different risk versus return

05 profiles

AUM sector is still in the nascent stage

06
Business Plan 35
 The simple analogy, here is of Fevicol – if you want to cut your interior

Does CAMS have

decoration budget, you would not think of replacing Fevicol with a cheaper
adhesive 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

pricing power? caps or keeps cutting down expense ratios, CAMS will also be expected to
oblige but this is a risk even to the AMCs themselves.

CAMS pricing structure is tiered which means

01 that fees drop as AUMs serviced scale up. This
is why CAMS revenue growth can trail AUM
growth for AMCs over the longer term.

It has high operating leverage which means that

02 even as % fees drop, absolute higher incremental
sales flow through the bottom line better due to
operating leverage.

CAMS fees of 5bps is a very small fraction of the

03 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.
Image Placeholder
Business Plan 36
 Key Risk
Data security
Data security is the top priority of RTA
1 2
as any compromise with data security &
information theft could badly impact the
RTA like CAMS.
Blockchain
If investor portfolios are maintained on a
3 4
Blockchain, there is no need for RTA. As the
network is self-regulating, there is no need for
any extensive regulation. It eliminates the need
for a central trust to issue authority as smart
contract executes, by itself. Reduces operational
burden as investor complaints can be addressed
over blockchain.
Business Plan
SEBI Regulation on expense
ratio : profitability
Since SEBI regulates mutual fund industry, they can
put a limit on the expense ratio charges. And if the
expense ratio of mutual fund house decreases, it
would reduce the profitability of the company.
Dependency on economic
performance
RTA business depends upon growth of the mutual
fund industry. Mutual fund industry growth would
depend upon the overall growth of the economy, so if
it slows down then adverse effect. Due to increasing
SIP, there is more stability in the AUM market.
37
 Key Risk (Expense Ratio)

MF TERs (Mutual fund total expense ratios) have come down and
hence the RTA MFs charges % also came down, because
honestly speaking when the MF company itself is earning less, it
will try its best to squeeze its vendors too.

Business Plan 38
 Competition

If you look at the RTA sector in India CAMS is the market leader with a 70% share
in RTA. its competitors include kFINTECH technology, which was earlier known as
Karvi, holds around 27% market.

Among the top AMCs, CAMS cater to the majority of them including SBI Mutual
Fund, which is the largest fund housing terms of AUM, then HDFC AMC, ICICI
Prudential, Aditya Birla Capital, and many more.

On top of that, there's a high entry barrier in the RTA sector. This is due to the fact
that RTA business is technology-intensive, that requires huge investment &
technical skills to cater to the ever-growing high volumes of transactions.

There is a significant focus on data security & data management - strict

compliance. RTA business requires significant domain expertise & a good
relationship with AMC. That's where CAMS would enjoy the market leadership.

There are 4 Insurance Repositories. Market share of:-

NSDL Database Management 45%
CAMS Insurance Repository 39%
KARVY Insurance Repository 11%
Central Insurance Repository 6%
The Duopoly of MF RTA Industry – CAMS vs
KARVY – a report card
 Some quick Updates
They have secured license to launch Account Aggregator services and Central Record Keeping
Agency for NPS. So product portfolio has expanded to offer digital lien services for Banks and
lending companies and Recon DynamiX , for managing large scale transaction volume.

Certificate of Registration awarded as a Central Recordkeeping Agency (CRA)

for NPS (National Pension System) & platform build is underway for Q3 – FY22
launch.

Expansion into new business for digital lien on

MF, Reconciliation platform, Onboarding platform
for AIF/PMS customers seeing market response.

Business Plan 41
 Sector Analysis

CAMS can benefit more during the bear

phase of market as retailers would prefer
a safer option of MF during that phase

Business Plan 42
 Sector Analysis

Reduction in
Corporate Tax Rate
to Boost Capital
Base of financial
institutions

Business Plan 43
 Entry barriers for this sector

Business enabler and

Idea customer care functions
being offered by MF RTAs
Extensive Branch
network Planning

The close relationship between

Strategy MF AMCs and RTAs makes it
challenging to switch RTAs
Being a knowledge
partner for the entire Success
fraternity of AMCs

Business Plan 44
Our Take

Image Placeholder
 OUR TAKE

THIS IS ONLY FOR EDUCATIONAL PURPOSE AND

NOT A STOCK RECOMMENDATION
 Meet The Team

Debjani Mukherjee Shashank Udupa

Student Founder of Avalon Scenes
(BSc Economics Hons.) Ex-Investment Banker
 End of slides

Thanks!
Disclaimer: We encourage all investors to use the information on
the channel as a resource only and should further do their own
research on all featured companies, stocks, sectors, markets and
information presented on the channel. Nothing published in this
video should be considered as investment advice.

THIS IS ONLY FOR EDUCATIONAL PURPOSE AND

NOT A STOCK RECOMMENDATION