Computer Age Management Services Ltd Q2 FY2025 Concall Summary

Key Takeaways

• "Best quarter ever" across metrics: MF revenue grew 32.9%, non-MF just short of 32%, and EBITDA margin expanded 240 bps to 46.9%, all on the back of record AUM addition of nearly INR5 lakh crores.
• Equity market share hit 66%: Equity assets grew 59.4% vs the industry's 53.5%, adding 100 bps of share, and the company captured 66% of industry net sales, deepening its grip on the most valuable part of the MF revenue base.
• Non-MF diversification is working, but the core is still the cycle: Payments grew 69% YoY, KRA grew 56%, and AIF rebounded 21%, yet management is explicit that the company remains "married to" the capital markets cycle that drives the MF core, ~55% of payments, and the KRA business.
• Margins hit 46.9%, and the year-end target of 47.5% is "well within reach": Management achieved 2.4% annual margin improvement in one quarter against a ~1% annual target, while keeping employee costs at 32% of revenue and holding fixed other expenses stable.
• What to watch next quarter: Whether the 30%+ MF revenue growth rate decelerates toward teens as management expects, the pace of insurer integration on Bima Central, and any live revenue from the Nivruti NPS product.

The Quarter's Engine: MF Asset Growth & Market Share

• Record AUM addition: The company added almost INR5 lakh crores in a single quarter, an amount that historically took a full year, driven by the state of the capital markets.
• Equity share gains: Equity assets grew 59.4% vs the industry's 53.5%, lifting equity AUM market share by 100 bps to 66%, and equity is the core of retail markets and the revenue base for the MF business.
• Net sales dominance: CAMS captured 66% of industry net sales, a measure of retail participation that continues to enhance the franchise.
• SIP registrations hit a record: The quarterly number from three years ago is now a monthly number, and management is bracing for monthly SIP registrations to reach INR50 lakhs in some months, calling SIPs "almost lifetime flows of assets" and "lifetime foundational revenue creators."
• NFOs benefit the broader platform: Large sectoral fund launches showed up in payments and KRA because many NFO investors are new to the MF industry, feeding the unique PAN growth that was up 31% ahead of the industry.
• Yield stability holds: Asset-based revenue tracked AUM growth with a favourable equity MF mix driving an 84% AUM-to-fee proportion vs the typical 75% thumb rule, and management confirmed discussions with large funds are complete, with yields expected to remain stable and telescoping impact to continue in line with the past decade.

Kumar: "None of this is about a quarter or what will happen only in a quarter and then vanish. These are stable, almost lifetime flows of assets lifetime foundational revenue creators for the enterprise."

Non-MF Diversification: The Three Engines Firing

• Payments (CAMSPay): Revenue grew 69% YoY on an expanded base, driven by SIPs, recurring payments, housing finance, and insurance, with the educational segment now reporting small revenue and management taking a more aggressive view for FY'26.
• KRA: Revenue grew 56% YoY on top of ~95%+ growth in FY'24, driven by individual investors buying multiple MFs and new logo sales on the fintech, broking, and Demat side, with the industry on an expansion trend and onboarding/authentication playing a strong role in regulated markets.
• AIF/PMS: Revenue rebounded 21% YoY after a falloff last quarter, with the highest number of quarterly wins ever at 57 new mandates across core AIF, PMS RTS servicing, fund accounting, WealthServ platform, WealthTrack analytics, and custody.
• Non-MF margin creep: Margins in the non-MF segment have risen from ~15% to ~19% on the back of good growth in payments and KRA, and management will consider publishing non-MF margin numbers next quarter.
• Diversification ambition: Management is driving to grow non-MF revenue contribution to 20%, though the company remains structurally tied to the capital markets cycle that drives the MF core, ~55% of payments, and the KRA business.

Kumar: "There is a significant diversification too, but we will be married to this."

Margin Delivery & Cost Structure

• EBITDA margin hit 46.9%: Up 240 bps YoY and 140 bps sequentially, one of the highest levels in the recent past, while PAT margin rose ~270 bps YoY to 32.4%.
• Employee costs well within target: Grew ~20% YoY but hiring was muted relative to transaction and complexity growth, keeping the ratio at 32% of revenue, with some pay increases absorbed.
• Fixed other expenses stable: Held at INR25-30 crores per quarter, with one-off professional charges for MFCentral incorporation and data privacy preparation.
• Variable cost flexibility: ~8% of costs are variable (data entry, data cleaning people), and in peak COVID margins never dropped below 30%, with the company relying on automation rather than hiring to manage scale.
• Year-end margin target: 47.5% is "well within reach," less than 48% is doable this year, but management is characteristically conservative: "we don't want to be very aggressive on margin target. We've never been, and you know that."

Charan: "We don't want to be very aggressive on margin target. We've never been, and you know that."

The New Business Builds: Early-Stage Bets

• Bima Central: Only 2-3 insurers integrated currently (SBI General and ICICI Pru), with 2 more expected by mid-to-late November; 1 lakh service transactions is a milestone but needs to 10x to be meaningful, and as each insurer integrates, they will strongly start promoting the platform.
• e-insurance: New policy conversions doubled from a 5-lakh-per-quarter baseline in FY'24 to ~10 lakh per quarter in FY'25, forming a foundational block for the insurance business, with management hoping to keep this as a baseline.
• MFCentral JV: Formally approved and in the process of capitalizing as a 50-50 JV with KFin; the independent entity will have its own capital and focused market-facing decision-making, with enhanced ability to work on financial transactions, loan against mutual funds, and other emerging areas.
• Nivruti NPS (Fintuple): Product is getting launched but no live client yet; the first deal is in the process of being closed, and the company has crossed 1 lakh overall CRA accounts, largely retail and private sector employer-led.
• Think360 puts and takes: Quick ID (video KYC) is growing and Algo360 won new contracts (LTFS, Stable Money), but account aggregator cannibalization has not yet been offset by Amaze (TSP++), though management expects the puts and takes to balance.

Revenue Trajectory & The Cycle Question

• MF revenue growth expected to decelerate: Management was explicit that 30%+ MF revenue growth is "perhaps a quarter or 2 phenomenon, it's unlikely to be a 2-year phenomenon," with MF revenues expected to go back to teens as the base expands.
• Yield mechanics are structural: The telescopic pricing model means as AMC AUM rises through slabs, effective yields decline, but the reverse is also true: if AUM falls, pricing automatically adjusts upward in invoicing, providing a natural hedge.
• Equity yield range: On a QoQ basis, equity yield hovered around 3.4 to 3.5 percentage, with the overall equity decline broadly on the same lines, and the 75% asset-to-asset fee growth thumb rule expected to hold good on average with positive surprises possible in some quarters.
• AIF competition rising: Overseas providers are now selling in the same market, but mitigants include GIFT City with better unit economics and the WealthServ digital onboarding stack that eliminates the need for legal and accounting people, with 175+ buyers and a trend toward digital money raising that management expects to accentuate.

Kumar: "Now MF is a very large base. So for MF revenue to continue hurting forward at 30% plus is perhaps a quarter or 2 phenomenon, it's unlikely to be a 2-year phenomenon."

Guidance & Commitments

Key Metrics