Computer Age Management Services Ltd Q2 FY2024 Concall Summary

Key Takeaways

• Growth story intact, one-time reset behind: Revenue grew ~10% YoY, held back by a completed large-contract renegotiation; management says if AUM grows 20%, revenue should grow 14-15% going forward.
• Non-MF revenue surged 47% YoY: Share of non-MF revenue hit ~13%, driven by CAMS KRA nearly doubling and broad-based momentum; management targets +20% growth for the next one to two years.
• Margins improved on cost discipline: EBITDA margin reached 44.5% as fixed expenses peaked and declined; management expects 50-60% of incremental revenue to flow to EBITDA in a normal quarter.
• Platform businesses approaching 40% EBITDA: KRA and AIF already deliver ~40% margins; payments and insurance are expected to mirror that character in three to four quarters as they scale.
• What to watch next quarter: Whether the Fintuple private bank transformation launches in December, Temenos Multifonds goes live, and Beema Central begins contributing revenue.

The One-Time Yield Reset: What Happened and Why It Matters

• A "once in a 10 year event": A large mutual fund contract was renegotiated after five years, causing a marginal yield decline whose spillover hit Q2. The renegotiation is now complete.
• The math of the gap: AUM expanded 20% YoY, which would normally produce 14-15% revenue growth. Actual revenue grew ~10%. The ~5% gap is entirely attributable to that one-time price reset.
• Going-forward trajectory: Management expects only normal telescopic pricing impact (small, marginal rate depletion) for the foreseeable future, with no unusual yield moments. If assets grow 20% in the next 12 months, revenue should grow 14-15%.
• Equity mix tailwind: Equity share of the asset mix rose from 45% to 47.7%, providing a structural yield benefit that partially offsets telescopic pricing pressure.

Anuj Kumar: "if assets let's say in the next 12 months grow 20%, there's no reason that revenue will grow only 10% revenue should grow 14% to 15%."

Non-MF Business: The Diversification Engine

• Revenue breakout: Non-MF revenue grew 47% YoY (30% excluding a one-time Think360 contribution), lifting its revenue share ~300 bps YoY to about 13%. Management had targeted growth in the 20s and called this a "great occurrence."
• CAMS KRA nearly doubled revenue in the past year after a complete platform revamp and strong go-to-market push. Growth is expected to continue over the next 12 to 24 months as operations stabilize and large customers scale.
• Near-term contributors: CAMSPay, Think360, AIF and insurance are expected to be large contributors in the coming two quarters. AIF revenue growth, which had slowed, is expected to return to prior reported levels.
• Insurance: a tale of two dynamics: While eIA accounts and policies grew, a fall-off in persistency outsourcing services caused a small overall revenue decline. Beema Central goes live this quarter and should start generating traction.
• Platform economics emerging: Businesses that achieve platform capability (hundreds of small users, low labor deployment) are delivering ~40% EBITDA. KRA and AIF are already there; payments and insurance are expected to show similar character in three to four quarters as they scale another 30-40%.

Anuj Kumar: "wherever we have achieved a platform capability, which means I have hundreds of small users plugging into the platform, I don't have to deploy too much labor, a new development all I need to deploy is storage, servers, connectivity, ability to manage API's, businesses start delivering 40% EBITDA"

Mutual Fund Franchise: Share Gains and Structural Strength

• Equity market share expanded ~120 bps to 65.5% because net sales market share held up at 80% in Q2. Net sales is the net money coming into the market from investors, and this strong share drove the equity AUM share higher.
• Five mutual fund wins reported, including two new market entrants (Helios and Zerodha) that went live in October, expanding the active AMC count.
• Transaction volumes grew 24% YoY, outpacing both AUM and revenue growth, signaling retailization as middle- and bottom-of-pyramid participation increases with smaller individual ticket sizes.
• Non-asset based MF revenue flattish QoQ: This bucket (transaction fees, call center, applications) is not expected to propel growth or profit. Only paper transactions generate per-transaction revenue; over 80% of ~60 crore annual transactions are digital SIP triggers with no incremental revenue.

Margins and Cost Discipline

• EBITDA margin at 44.5%, equal to or better than earlier mini-quarters, driven by operating leverage, productivity, automation and cost control. PAT percentage is trending upwards.
• Fixed expenses have peaked and are declining: A couple of quarters back there was concern about fixed expenses rising; management said that was the peak and it has played out. Salary increased only ₹7.6 cr YoY despite April increments, ESOP costs and Think Analytics costs.
• Incremental flow-through: Management expects 50-60% of incremental revenue to flow down as EBITDA in a normal quarter. Operating expenses (excl. out-of-pocket) will remain at 7-7.5% of revenue.
• No lumpy OPEX expected in the immediate few quarters; any large technology project would be more long-term in nature. Employee expenses are on a downward trend with only inflation-driven increases ahead.

Ramcharan SR: "we feel that the incremental cost will be measured, and we generally expect 50% to 60% of the increase in revenue to flow down as the EBITDA in a normal quarter."

New Platforms and Product Launches

• Wealthserv 2.0 introduced, several notches ahead in digital onboarding and investor servicing.
• Temenos Multifonds fund accounting suite ready to take on clients, expected to be live and in service in about two months.
• WealthTrak launched in beta: an analytics platform aggregating data on the alternative side (AIF) with peer comparison capabilities.
• Fintuple transformation for a top private sector bank nears conclusion; announcement expected in December. Integrates custody operations, data sharing, investor onboarding, video KYC (from CAMS and Think360), and RTA operations for AIF.
• Bima Central now available on PlayStore and App Store; allows opening an eIA account and linking policies. Over time will support payments, loan marking, borrowing against policies, and a single screen with all surrender values.
• CAMS KRA 10-minute KYC solution launched, enabling instant onboarding for brokerage Demat accounts and mutual funds using OCR, face match and liveliness checks. Offering broadened to FinTechs and brokerages beyond the traditional MF focus.
• Think360 built a PFM module on account aggregators (several customers acquired) and introduced a geo wealth index that estimates wealth capability of an individual from an address.

Guidance & Commitments

Key Metrics