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Result Highlights

* Revenue – (1) Asset-based MF revenue rose 2.3%, which, expectedly lagged the 3.4% growth in AAUM serviced. (2) Non-asset based MF revenue de-grew 8.5% QoQ since paper-based transactions were constrained due to the second Covid wave affecting human mobility. (3) Non-MF revenue rose 1.4% QoQ.

* EBITDA – (1) EBITDA margin (net of AS 116 capitalisation) improved from 41.8% in 4QFY21 to 43.3% in 1QFY21. (2) Margin expansion was mainly driven by lower paper-based transaction business, which is a low margin business.

Our view – CAMS remains a key play on the Indian AMC industry

Asset-based MF revenue growth lagging AAUM growth is normal since the growth of the former is generally ~70% of the latter: Furthermore, the decline in yield for Assetbased MF revenue due to telescopic pricing (lower yield with rising AUM) was materially offset by the rise in share of equity in asset mix. Management does not see any material impact from re-negotiation of contracts with the mutual funds. Paper-based transactions are the major contributor to Non-asset based MF revenue and hence, restrictions on mobility moved the needle negatively for Non-asset based MF revenue.

Franklin Templeton AUM will reflect in AUM serviced in 2QFY22, while the account will turn marginally EBITDA positive by 4QFY22: Franklin Templeton (FT), the only mutual fund with in-house RTA, was finally brought on board after a process that started on 13th March 2020. The cost pertaining to the onboarding is being charged to the P&L as and when they are happening. There will be cost related to rebadging of employees and on re-branding, which will be incurred during 2QFY22. The market share in mutual fund QAAUM inched up ~10 bps QoQ to 69.6% and this does not yet reflect FT.

We maintain ‘Buy’ rating on CAMS with a revised price target of Rs 3673: We value CAMS at an FY24 P/E of 44x for an FY21-24E EPS CAGR of 26%.

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