CAMS IPO ANALYSIS BY FINCAREPLAN
CAMS generally knew as COMPUTER AGE MANAGEMENT SERVICES. The company shifts itself to a public sector by an IPO through an offer for sale.
The issue size of IPO is rupees 2244.3 Cr for 1.82 Cr shares. They provide a special discount of Rs. 120 per share to employees.
The offer for sale is majorly is due to the redemption of NSE complete holding of 37.48% and Great Terrain becoming promoter with 43.5% share.
This article of us is not a promotional towards this IPO, rather before investing in a company, you should need to understand them,
· Business Model.
· Revenue growth
· Assets and liabilities.
· Fundamental and Intrinsic Value of the company.
We always mention that, “Invest on a company for its business and value and not on price or momentum in the market”.
CAMS IPO – BUSINESS OVERVIEW:
The company produces technology-based service for mutual funds industries. That includes,
· Brokerage compensation
· Electronic related services.
They are the biggest registrar and transfer agents of transactions related to mutual funds. They hold 70% of the market share leading front ahead of their competitor Karvy (27%) and Franklin (3%).
In addition to this, they also have footprints in serving other sectors
· Loans against Mutual funds
· Insurance companies.
· AIF & PMS
The company has backed with Rs. 721.34 Cr for the FY 2019-20. The revenue split across operations are,
· Data Processing (76.72%)
· Customer Care Service (8.67%)
· Recoverable (5.03%)
· Miscellaneous Services (5.38%)
· Software license fees, development, and Support (1.2%)
· Others (0.3%)
CAMS IPO – FINANCIAL ANALYSIS:
The above image is the pictorial representation of CAMS from FY 2016-17 to FY 2019-20 and Jun-2020.
The company’s asset has grown at a rate of 8.22% per annum in the last 4 years.
In the last 5 years, the revenue has grown at a rate of 12.8% and 4 years growth is almost 9.47%.
Profit after tax also have seen better growth in the last 4 years of 8.73%
Amid the COVID situation, the company has shown a sustainable business which equals the average quarterly sale of FY2019-20.
Since the company has acquired 70% of the market share, it behaves as a monopoly in its business.
As mutual funds and schemes are increasing day by day, CAMS is going to benefit.
Let us have a snap of how the mutual fund has grown in the last 5 years. The industry is growing at a rate of 14.87%.
CAMS 80% of revenue is generated through the mutual funds business. So, the company is looked to be in good shape for long term investors.
CAMS IPO – FUNDAMENTAL ANALYSIS:
As an intelligent investor, you should be focusing on calculating the value of the company by
· Fundamental Earnings of the company
· Excess cash per Share
· Intrinsic value.
The current Earnings per Share (FY2019-20) is 35.57.
The 3-year growth of EPS is 11.77%.
P/E Ratio: The Total number of shares the company holds is 4.88 Cr shares.
The current P/E ratio (FY2019-20) is 35.44.
This is a very high valuation in terms of more than 35 times the earnings per share.
ROE (Return on Equity) – 31.4% (last three years)
ROCE (Return on Capital Employed) – 34.44(last three years)
EXCESS CASH PER SHARE:
Excess cash per share is termed us the liquidable cash which a company has. This is the corpus which company holds after the investments, dividends, and all the expenses.
Excess cash is positive for a company.
Investments – 315.52 Cr
Cash and Cash Equivalents – 2.92 Cr
Bank Balance – 81.04 Cr
Other Assets – 5.88 Cr
Investments – 0.55 Cr
Property Asset – 63.27 Cr
Other Assets – 71.7 Cr
Total Liquidable Assets (Current & Fixed) = 540.88 Cr
Total Liabilities – Rs. 307.26 Cr
Excess Cash (Liquidable) = Total Liquidable Assets – Total Liabilities
= 233.62 Cr
So, Excess cash (Liquidable) per Share – Rs. 47.87
With the growth of Revenue which has seen 12.87% over the last 5 years, the intrinsic value should be Rs. 656.
When we expect a growth of 20%, the intrinsic value will be Rs. 979.4.
These values are calculated without a margin of safety (MOS).
If we calculate with a minimum 20% margin of safety,
The intrinsic value will be ranging between – Rs. 524.8 to Rs. 783.53 per share.
So, as per intrinsic value calculation, the IPO price band is overvalued by 56%.
· The company has a 70% market share in the mutual fund’s digital industry.
· The 5 years revenue is growing by 12.87% per year.
· The excess cash per share is 47.87%
· There was significant growth in both EPS and PAT.
· Strong fundamentals in cash flow and business management.
· Strong ROE and ROCE have significantly seen.
· Apart from Mutual fund, the business other operational sectors like insurance and NBFC’s have started falling.
· The revenue is from paper based Mutual Fund AMC’s. In recent days, many AMC’s are focusing on digital transformation. This might affect revenue growth.
· High P/E of 35.44.
· The IPO price of CAMS is 56% overvalued than the intrinsic value.
IMPORTANT DETAILS OF CAMS IPO:
· IPO opening Date: 21 September 2020.
· IPO Closure Date: 23 September 2020.
· Face Value: Rs. 10 per Share
· Issue Price band: Rs. 1229 – Rs. 1230 per share
· IPO lot Size – 12 shares
· Minimum Lot – 1 Lot – Rs. 14, 760.
· Maximum Lot – 13 Lots – Rs. 1, 91, 880.
· Finalization of Allotment – 28th September 2020
· Initiation of Refund – 29th September 2020
· Credit of shares to DEMAT Account – 30th September 2020
· IPO Shares Listing in the market – 1st October 2020.
· Here we have a share of the details of CAMS as a company.
· It is always insisted not to invest in a company with 35 times earnings.
· Of course, in this bullish market, all the IPO’s are launched at a high price band.
· IPO becomes complete speculation and the risk is totally in your hands.