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A key beneficiary of the capital market growth

With over 30 years of specialized knowledge and experience, CAMS stands as India's top and rapidly expanding Qualified Registrar and Transfer Agent (QRTA) for Mutual Funds (MFs). They cater to ten of the fifteen largest MFs by Average Assets Under Management (AAUM).

* CAMS is India’s largest registrar and transfer agent of AMCs with an aggregate market share of ~68% based on mutual fund AAUM managed by its clients and serviced by it.

* In Q3FY25, CAMS serviced Rs. 46.3 tn. Assets under Management (AuM). In Q3FY25 equity net inflows touched Rs. 97,000 cr. which is a staggering 89% increase on a YoY basis.

* Revenue experienced a CAGR of 17% from FY21 to FY24, primarily driven by an 18% CAGR in AUM. Looking ahead, we anticipate revenue to have ~14% CAGR over FY25E to FY27E, supported by an expected 19% CAGR in AUM. This projection accounts for potential yield compression due to anticipated pricing adjustments in the upcoming quarters.

* EBITDA/PAT grew by 22%/20% CAGR over FY21-FY24, driven by a margin expansion of 540bps/250bps. We expect EBITDA/PAT to grow at a CAGR of 13%/14% during FY25E-FY27E, supported by stable margins. Even amidst yield compression, the company remains confident in maintaining profitability through automation and operational efficiencies.

* CAMS won all 3 RTA mandates awarded recently, including the prestigious Jio BlackRock MF; With these wins, CAMS is the partner of choice for 6 out of 7 new AMCs which are ready for launch.

Investment Rationale

* Indian mutual fund industry is a very promising industry, fast growing in the world and grossly underpenetrated. MF AUM as a percentage of GDP is a mere 18% in India compared to the world average of ~65%.

* RTA industry is a very high moat industry requiring huge investment in software & hardware platform and human skills & experience.

* Between FY20-FY24, mutual fund assets grew at a CAGR of 22%, whereas bank deposits have grown at a CAGR of just 11%.

* India’s GDP per capita was US$ 2,698 in 2024. This is expected to increase to US$ 4,195 by 2029, propelling MF inflows to newer heights.

Outlook & Valuations

The penetration potential of the industry is high. Being the market leader, CAMS is all set to capitalize on this huge growth potential supported by a healthy balance sheet and return ratios. CAMS is currently trading at 36x (5 yr avg=40x), we value at 36x to arrive at a target price of Rs. 4,425, recommend Accumulate rating.

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