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Rising competition between asset managers does not impact CAMS

Result Highlights

* Asset-based Mutual Fund Revenue: Asset-based mutual fund revenue was up 11.3% QoQ and 32.5% YoY to Rs 1.73bn, broadly in line with AAUM serviced by CAMS, which rose 10.7% QoQ and 31.6% YoY.

* Non-Asset-based Mutual Fund Revenue: Non-asset-based mutual fund revenue rose 25.9% QoQ and 42.7% YoY to Rs 0.32bn, with the key factor driving this revenue sequentially being the return of paper-based transactions.

* Non-Mutual Fund Revenue: Non-mutual fund revenue rose 11.1% QoQ and 24.4% YoY, driven by growth in AIF and Insurance businesses.

* Operating profit margin: Operating EBITDA amounted to Rs 998.6mn for the quarter, translating to an EBITDA margin of 43.9%.

Our view – Rising competition between asset managers does not impact CAMS

Upward pressure on commissions for mutual fund distributors does not impact CAMS as such: Management clarified that CAMS’ fees are not linked tightly to what happens to NFOs in a given quarter and this implies that rising competition between asset managers does not really impact CAMS.

Multiple Non-MF businesses continued to evolve on a positive path: Encouragingly for the Account Aggregator (AA) business, management opined that the Technology Service Provider offering is going to be a bigger market for CAMS than the standard AA services.

We maintain ‘Buy’ rating on CAMS with a revised price target of Rs 3643: We value CAMS at 55x FY23 P/E for an FY21-24E EPS CAGR of 25%.

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