CAMS – Indirect Bet on Financialization?

A Summary of CAMS Q2 FY25 Earnings Call

The provided source is a transcript of CAMS’ Q2 FY25 earnings call, where the company’s management discusses the financial performance and key business highlights for the quarter. Here’s a summary of the key takeaways:

Financial Performance:

• CAMS reported strong financial performance in Q2 FY25, with overall revenue growing by 32.7% year-on-year to ₹365 crores.
• MF revenue grew by 32.9% to ₹318 crores, driven by a significant increase in assets under management (AUM) and stable yields.
• Non-MF revenue grew by 31.9% to ₹47 crores, demonstrating the success of the company’s diversification strategy.
• Profitability also improved, with EBITDA margin reaching 46.9%, driven by operating leverage and cost optimization measures.
• The board declared an interim dividend of ₹25 per share, including a special dividend of ₹10.5, reflecting the strong financial performance.

Key Business Highlights:

• Mutual Fund Business:
  • CAMS continued to dominate the MF RTA market with a market share of around 68%.
  • The company added a record ₹5 lakh crores in AUM during the quarter, reaching a total AUM of ₹45 lakh crores.
  • Equity AUM grew by 59.4%, significantly outpacing the industry growth rate.
  • CAMS witnessed strong growth in SIP registrations and collections, indicating robust retail investor participation.
• Non-MF Businesses:
  • CAMS’ non-MF businesses, including CAMS K, CAMS Pay, Insurance, and Alternatives, continued to grow at a healthy pace.
  • CAMS K: Achieved 56% year-on-year revenue growth, driven by the addition of 26 new fintech clients and expanding into non-MF segments.
  • CAMS Pay: Revenue increased by 69% year-on-year, fueled by strong growth in UPI Autopay and the addition of new clients like LIC.
  • Alternatives: Rebounded to 21% year-on-year revenue growth, driven by increased client signings and the successful launch of the WellServe digital platform.
  • Insurance: Witnessed significant growth in e-policy issuances, with the company doubling its quarterly additions.
  • Account Aggregator: Maintained a market share of 16.5%.
  • NPS: Achieved 2.5x year-on-year growth and crossed 1 lakh subscribers.

Strategic Initiatives:

• MF Central JV: The JV with other RTAs to create the MF Central platform is progressing, with the company expecting formal incorporation soon. The JV aims to expand the platform’s capabilities and create new revenue opportunities.
• Fintech Expansion: CAMS is actively expanding its footprint in the fintech space through initiatives like the launch of Nexus for KYC dashboards, WhatsApp KYC, and the new NPS onboarding product from FinTupil.
• Focus on Digital and Automation: The company continues to invest heavily in technology and automation to enhance its operational efficiency and maintain its competitive edge.

Management Outlook:

• CAMS remains optimistic about its long-term growth prospects, driven by the continued growth of the Indian financial services industry and the increasing adoption of digital solutions.
• The company expects its non-MF businesses to continue growing at a faster pace than the MF business, contributing 20% of total revenue by FY27.
• While MF revenue growth may moderate in the coming quarters, CAMS expects to maintain healthy overall revenue growth through a combination of organic growth and strategic initiatives.

Key Takeaways from Q&A:

• CAMS’ pricing model incorporates a telescopic structure, meaning yields adjust automatically based on AUM fluctuations.
• The company acknowledges the potential impact of regulatory initiatives like the Unified Lending Interface on its account aggregator business.
• CAMS is actively managing costs, with a focus on automation and optimization of variable expenses.
• The company aims to maintain a stable EBITDA margin in the range of 47-48%, depending on future AUM growth and cost pressures.

The earnings call transcript provides a positive outlook for CAMS, highlighting its strong market position, successful diversification strategy, and commitment to innovation. However, the company faces challenges from increasing competition, regulatory changes, and potential market volatility.