43.5%

37.5%

5.99% 3.3%

3.2% 6.0%

Shareholding Pattern

Promoter (Great Terrain) NSEIL

HDFC HDFC Bank

HDB Trust Others

COMPUTER AGE MANAGEMENT SERVICES LIMITED (CAMS) Prospectus Findings

CAMS business explained in 1 Sentence

It is a financial infrastructure and services provider to mutual funds and other financial institutions with over two decades of experience. More about CAMS They provide technology-based services, such as transaction origination interface, transaction execution, payment, settlement and reconciliation, dividend processing, investor interface, record keeping, report generation, intermediary empanelment and brokerage computation and compliance related services, through their pan-India network to its mutual fund clients, distributors and investors. They also provide certain services to alternative investment funds, insurance companies, banks and non-banking finance companies. As of Sept 30, 2019, they employed 4,314 personnel and 2,136 contractual employees

How does it earn money?

A substantial portion of the fees that they charge its mutual fund clients is calculated and charged on basis points of the average assets under management (“AAUM”) of the funds serviced. The fee structure therefore is not directly linked to its expenses In addition, the fees that they charge clients differ between asset classes of mutual funds. For example, they charge higher fees for equity funds than they do for debt funds. Consequently, any reduction or change in the composition of AAUM of the funds managed by its clients, could adversely affect revenue and profit. Their contracts with such mutual fund and AIF clients are typically perpetual in nature, unless terminated by either party. For their other clients the validity for such contracts ranges between one to three years. They negotiate pricing terms with these clients on a periodic basis and their contracts permit them to terminate their arrangements with the company by providing three to six months’ written notice, after which they may engage the services of its competitors.

Management

Mr. Anuj Kumar, their Whole-time Director and Chief Executive Officer has over two decades of experience and has been with the Company since June, 2016. Their Key Management Personnel have average work experience of over 25 years and have been with the company for over four years. Its promoter Great Terrain is an affiliate of Warburg Pincus.

Company Structure

7 Facts to know

CAMS is India’s largest registrar and transfer agent of mutual funds with an aggregate market share of 69.4% based on mutual fund Average Assets Under Management (AAUM) managed by its clients and serviced by CAMS during November 2019. In the last five years, the company has been able to expand its market share from 60.5% in March 2015 to 67.6% in March 2019, based on AAUM serviced. Some of its prominent clients include HDFC Asset Management Company (HDFC AMC), ICICI Prudential Asset Management Company, SBI Funds Management Private, Aditya Birla Capital, and DSP Investment Managers. In total, the company serviced INR18.7 trillion of AAUM of 16 mutual funds as of November 2019. The company earns revenue on the basis of mutual fund AAUM of its clients. Over the last five years, the AUM of equity mutual funds serviced by them grew from INR2,180 billion to INR6,643 billion in FY2019, representing a CAGR of 32.1%. From handling over 98 million transactions in the financial year 2015, they handled over 313 million transactions in the financial year 2019. They offer an integrated and customized portfolio of services through its pan-India physical network comprising 278 service centers spread over 25 states and five union territories as of September 30, 2019. These are supported by call centers in four major cities, four back offices (including a disaster recovery site).

Financial Statement Analysis

Objects of Issue

The issue will be an Offer for Sale of up to 12,164,400 Equity Shares by the Selling Shareholders. The entire

proceeds from the Offer for Sale will be paid to the Selling Shareholders and we will not receive any such proceeds.

Pre Issue and post issue shareholding of selling shareholders

Name of shareholder Pre Issue Stake % Post Issue Stake %

Great Terrain (Promoter) 43.5% 35.0%

NSEIL 37.5% 25.0%

Acsys 1.9% 0.0%

HDFC 6.0% 5.0%

HDB Trust 3.2% 2.2%

Industry

The assets of the Indian mutual fund industry have grown consistently since financial year 2000. The AUM has risen

at a CAGR of 17.4%, from ₹1.1 trillion as on March 31, 2000 to ₹23.8 trillion as on March 31, 2019. The industry’s

growth came against the backdrop of an expanding domestic economy, robust inflows and increased participation,

especially by individual investors. The mutual fund industry had 41 asset management companies (“AMCs”)

(excluding Infrastructure Debt Funds) as of March 2019, up from 32 in March 2000, after a brief drop to 28 in 2004.

The following graph sets out the trend in share of various mutual fund segments for the periods indicated – (Higher

Equity inflows can be attributed here due to higher returns in prior years/FOMO and the SIP marketing success)

The following graph sets out the net inflow of funds received by equity, debt, liquid/ money market funds and other

funds for the periods indicated – (Debt reduction due to money market crisis after IL&FS crisis)

The following graph sets out the penetration of mutual funds in India as compared to certain other countries (GDP in

USD terms has been considered for the graph below):

Investor mix of the Industry – Not only in equity, but even in MF retail investors have a bad name as the retail participation needs to increase significantly. To put that into context there are just 2 crore unique MF investors in India –

Indian MF industry is highly concentrated -

Immense Scope?

Market Share

Top 10 AMCs and some key figures

Risks

Future revenue and profit are largely dependent on the growth, value and composition of AAUM of the mutual funds

managed by their clients, which may decline.

Significant disruptions in information technology systems or breaches of data security could adversely affect business

and reputation.

They experienced an attack by a Crysis/Dharma ransomware variant on the server hosting the marketing website of

its Subsidiary, SSPL, in December 2018 which caused their data to get encrypted. This attack was contained and did

not spread through SSPL’s network or that of their Company.

Their services and the fees they charge clients for certain services are subject to change if applicable SEBI rules and

regulations are amended, or new laws or regulations are adopted, which could result in an adverse effect on business

and results of operation.

There have been instances of non-compliances with certain legislations and they have also received certain warning

letters from SEBI and a show cause notice from the IRDAI in relation to certain aspects of its operations.

They compete with a number of entities that provide similar services in each of the business lines in which they

operate

Positive Triggers

According to CRISIL, with stable inflation, rising disposable incomes and growth in the GDP, gross domestic savings

and household savings are expected to rise. With higher focus on the financial savings and saving instruments, the

proportion of financial savings in household savings as well as the net household financial savings are expected to

rise during the next five years.

According to CRISIL, the nominal per capita GDP of India is estimated to be ₹142,719, for financial year 2019.

Assuming average growth of around 11% in nominal GDP over the next five years, the same is expected to grow at a

CAGR of 10.4% (financial year 2019 - 2024) to ₹230,000 in financial year 2024.

Favourable demographics. India currently has one of the largest young populations in the world, with a median age of

28 years. According to CRISIL, as many as 90% of Indians will be below the age of 60 by calendar year 2020 and

63% of them will be between 15 and 59 years. In comparison, in the calendar year 2012, the US, China and Brazil

had 74%, 62% and 78% of their population below the age of 60.

Urbanization. Urbanization is a big growth driver for India as this leads to fast infrastructure development, job

creation, development of modern consumer services and the city’s ability to mobilize savings. The share of urban

population in total population has been consistently rising over the years and stood at about 31% in 2011 and is

expected to reach 36% by 2022 thereby increasing demand.

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