Key choice among MF games: CAMS ‘outlook is directly linked to that of the Indian MF industry, with around 70% market share in MF AAUM. As a dominant operator in a duopoly ATR market, its scale offers protection against market share volatility. We note that the concentration of its income among the best AMCs limits its pricing power and squeezes returns. We expect its improved productivity and unit savings to mitigate the slowdown in AUM MF growth to generate a 14% EPS CAGR in fiscal year 2021-24E. We start a hedge with an “add” note and a fair value based on DCF of Rs 1,850 (5% increase).
CAMS occupies a dominant position in the Indian duopoly of registrars and transfer agents (RTAs), reducing the risk of market share shifts. This makes it one of the best MF games and gives visibility to its earnings. We remain cautious about the medium-term challenges of the Indian mutual fund industry, which will likely put pressure on CAMS revenues, resulting in a (moderate) 14% EPS CAGR in fiscal year 2021-24E .
The CAMS model is intrinsically directly related to Indian AAUM MF, serving around 70% of Indian AUM MF, making it largely independent of market share movements among AMCs. Its MF revenues (87% of total in FY2020), although primarily related to AUMs served, have lagged asset growth due to continued compression of yields. This is due to the high concentration of revenues from the main customers (~ 36% of the first 2 AMCs and ~ 67% of the first 5), which limits its pricing power vis-à-vis AMCs.
Together with its subsidiaries, CAMS provides several value-added services to mutual funds, insurance companies and AIFs as well as associated stakeholders such as distributors and investors. Its commercial proposition is underlined by a wide distribution, a diversified bouquet of products, domain expertise and proprietary software and technological platforms.
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