Computer Age Management Services Ltd Q3 FY2024 Concall Summary

Key Takeaways

• Non-MF share hit 13%, up 330 bps YoY: Four of six non-MF businesses grew over 20%, with CAMS KRA up 129% and Alternatives adding 32 new mandates. The 20% revenue mix target is now within sight.
• EBITDA margin at 44.8%, a seven-quarter high: Revenue growth into higher-margin non-MF and muted expense growth drove the expansion, even as the company continues to invest INR5-6 crores per quarter in new platforms.
• The big yield reset is done: The one-time large yield reset with a major customer has been completed; no large depletion in yields is expected going forward other than telescopic pricing.
• New MF mandates are landing and scaling: Helios Mutual Fund and Zerodha went live during the quarter, with Helios already approaching INR1,000 crores AUM, while Unifi Capital was won as the next RTA mandate.
• What to watch next quarter: Whether Bima Central transactions start flowing by April 1 as promised, the pace of non-MF margin expansion toward the 25% target, and any update on the promised tabular revenue and profitability disclosure.

Non-MF Business: The Growth Engine

• Revenue mix shift accelerating: Non-MF share reached 13% of overall revenue, up 330 bps YoY, driven by Alternatives (21% growth, 32 new mandates), CAMS KRA (129% growth), and four out of six non-MF businesses growing over 20%.
• Profitability inflecting: Non-MF bucket profitability has crept up to around 10-15% EBITDA as revenue ramps up while investment spend plateaus at INR5-6 crores per quarter. Management expects margins to reach 25% in the next few quarters.
• Investment spend stays elevated: The company will continue investing INR5-6 crores per quarter on new platforms (AIF, wealth track, AA/TSP, etc.), adjusted for salary inflation, implying INR15-20 crores annually. The spend will not go down.
• Alternatives franchise deepening: 32 new wins in the quarter; CAMS well Served has over 110 sign-ups; 30-40% of new customers in AIF and PMS come through the digital route; GIFT City now has over 15 clients with 4 added in the quarter.
• CAMS KRA playing field expanded 3x-4x: The addressable market moved from CAMS-served mutual funds to all mutual funds, large brokerages and fintechs. 25 new financial institutions signed up, and product features like 10-minute KYC and AI-embedded offerings (assisted face match, OCR, liveliness check) are driving penetration.
• Fintuple goes live: The first program with a large bank has gone live; platforms are now growing beyond AIF and PMS into FPI, forex and treasury services. Offtake is expected to gain momentum.
• Account Aggregator scaling: Market share grew to over 13% in the AA ecosystem; CAMSfinserv is the preferred partner for F&O account opening use cases; 25 FIU clients are live. The platform is being enhanced to make onboarding easier, and management sees nothing preventing a repeat of 100% QoQ growth.

Anuj Kumar: "Non-MF is a lump, we want to keep it over 20%. And from what I see coming, I think there is significant confidence that, that will continue happening."

Core MF RTA: Steady, With Yield Clarity

• Equity AUM outperformance: Equity AUM grew 31% YoY, significantly ahead of industry growth of 24%, driven by SIP registrations and live book growth. Equity AUM market share reached 66%, up 140 bps YoY and 40 bps QoQ.
• SIP engine firing at lifetime highs: SIP live book grew 29% YoY vs industry 19%; SIP registration was at a lifetime high of 43.9%, adding heft to monthly collections, net sales and AUM growth.
• Asset-based MF revenue grew 13.2% YoY to INR212 crores; non-asset-based MF revenue grew 23% YoY to INR40.8 crores, driven by transaction growth and value-added services.
• Yield reset complete: The one-time large yield reset with a major customer has been completed. Yield compression was seen this quarter but equity mix (49.9%) was favourable, leading to a very marginal increase in yields QoQ. No large depletion in yields is expected going forward other than telescopic pricing.
• New mandates converting: Helios Mutual Fund and Zerodha went live during the quarter; Helios grew to close to INR1,000 crores AUM in a short time. Unifi Capital, a prominent PMS provider, was won as the next mutual fund RTA mandate.

Anuj Kumar: "If you remember, over the last few quarters, we have been indicating that from a yield pressure perspective... the onetime large reset of the yield with one of our major customers has been completed, you will see the impact of this in the next few quarters. Happy to say that it's played out like that in this quarter..."

Insurance & New Platforms: Building, Not Yet Contributing

• Bima Central app now live on App Store and Play Store; the first few insurance companies are fully integrated. Integration started with three insurers and one has gone live. By April 1, the offering is expected to be more rounded and transactions will start flowing in.
• Insurance Repository economics still subscale: The EIA piece (per policy billing) is not making money; the outsourcing business (policy servicing, persistency, calling) is making a small margin; the AIF segment (AMC for policies, policy conversion charges, transaction charges) is currently not making money. Management hopes to see breakeven from Q1 FY25 once Bima Central transactions start.
• CAMSPay won exclusive partner status from LIC for customer account authentication for third-party verification of digital insurance buyers. UPI Autopay is emerging as the preferred mode over NACH and E-NACH.
• CAMSRep won Oriental Insurance mandate for digital KYC, a joint offering powered by Think360's KwikID.
• Progress on Bima Central is slower than expected, per management's own acknowledgment.

Think360 & Analytics: Early Deals, Long Runway

• Algo360 deal with SBI Cards is now live and usage has begun. Contracts with three of the top 10 public sector banks for overall digitalization (digital KYC journey) are in place.
• Influence360 product ready for market: CAMS and Think360 built a geographic data product for business strategy, now ready for market.
• Risk analytics contracts won with CreditAccess Grameen and DCB for risk analytics expertise.
• Fund accounting platform upgrade: The Multifonds platform (for multicurrency fund accounting) is now going into production, with 3-4 clients migrating. This closes a gap in the offering for redomiciliation to GIFT City. CAMS will focus on AIF first before expanding to pension and MF.

Anuj Kumar: "Right now, I think one thing at a time. You know our approach, right? We don't try to spill into 100 places at the same time, one thing at a time. We want to make it a success."

Margins & Investment Posture

• EBITDA margin reached 44.8%, the highest in seven quarters, driven by revenue growth into non-MF and operating leverage. Expense growth QoQ was extremely muted, with only INR2.5 crores increase in OPE and INR1.7 crores more in ESOP non-cash charge.
• Margin trajectory is gradual: Management expects EBITDA to creep up by 20-30 basis points over the next few quarters and is not expecting to be close to 50% any time soon. Historically, operating EBITDA has grown about 1% a year.
• Non-MF margins expected to reach 25% in the next few quarters as revenue ramps up while investment spend plateaus. The timing depends on how fast revenue ramps up.
• Investment spend is structural, not transitional: The company will continue at INR5-6 crores per quarter on new platforms, adjusted for salary inflation. Non-MF investments will be in the range of INR15-20 crores a year. The investment amount will not go down.
• Management declined to split costs between core MF RTA and non-MF businesses when asked by an analyst, offering only broad guidelines on non-MF investment spend and bucket profitability.

Ramcharan: "Our trajectory of the non-MF margins, given that the spend is going to be plateauing and the revenue is going to be increasing, we expect that they will get to towards the 25 percentage in the next few quarters, for sure, right?"

Guidance & Commitments

Key Metrics