US-based private equity firm Warburg Pincus-backed Computer Age Management Services (CAMS) remained strong throughout the session, though there was some profit taking at higher levels on October 1, its first trading day.
The stock closed at Rs 1,401.60 on the BSE, rising 14 percent over its issue price of Rs 1,230 on trading volumes of 1,31,80,743 equity shares. However, the stock lost 7.67 percent from its opening price of Rs 1,518.
CAMS listed at Rs 1,518 (a 23.4 percent premium over its issue price) and rallied up to Rs 1,550 in initial trade. In the initial 15 minutes of trade, the counter witnessed volatile trade and hit the day's low of Rs 1,306.20. It immediately recovered to Rs 1,500 and largely managed to hold Rs 1,400 levels for the rest of the day.
CAMS is a technology-driven financial infrastructure and services provider to mutual funds and other financial institutions. It is India’s largest registrar and transfer agent (RTA) of MFs, with 70 percent market share in-terms of average asset under management (AAUM) as of July 31.
The company raised Rs 2,244 crore via the public issue, which was subscribed 47 times during September 21-23. The offer for sale by NSE Investments, the subsidiary of National Stock Exchange, which divested its entire 37.5 percent stake.
What should investors do with CAMS after listing with 23% premium?
"CAMS is well-positioned to capitalise on growth in the MF industry, backed by a diverse portfolio of services, pan-India physical network, domain expertise and comprehensive risk management system," Hemang Jani, Head - Equity Strategy - Broking & Distribution, Motilal Oswal Financial Services, said.
He advised investors to hold the company for the long term given its business model and healthy financials.
CAMS services four out of the five largest mutual funds as well as nine out of the 15 largest MFs, based on AAUM, as of July 31. It has successfully leveraged domain expertise, processes and infrastructure to cater to MFs, AIFs, insurance companies, banks and non-banking financial companies (NBFCs).
CRISIL expects the mutual fund RTA business to see 15 percent compounded annual growth rate (CAGR) over FY20-25 post a 17 percent CAGR over FY15-20. "Given the significant under penetration of insurance, AIF and other financial services, the headroom for growth for solutions provider like CAMS is significant," it stated.
Given its differentiated business model, and strong growth opportunities and return on equity (RoE)/free cash flow (FCF) profile, IDBI Capital is positive on CAMS' future growth prospects.
CAMS grew its revenue/EBITDA/PAT by 4/4/9 percent CAGR, respectively, over FY18-20.