Syrma SGS Tech: Healthy outlook sustained

16 Feb 2024 , 12:31 PM

Analysts of IIFL Securities hosted the management of CAMS at their IIFL’s Investor Conference in Mumbai. Key takeaways: 1) Strong focus on domestic MF-RTA business driving new client additions – won 6 out of 8 mandates; 2) Non-MF business continue to grow faster, revenue share increased from 9% to 13%; target is to achieve 20% by FY27; 3) Ebitda margins to be steady at 43-45% in near term, but operating leverage benefits will play out in medium term; and 4) Dividend payout at 65%; healthy cash balance of ~Rs6bn to support inorganic growth opportunity. 

Strengthening its leadership position in core MF-RTA business: 

CAMS’ overall serviced QAAUM grew 22% YoY to Rs33.9trn; constituting ~68% market share in 3QFY24. AUM growth was primarily driven by equity segment; while debt and liquid AUM remained flat; increasing equity AUM mix to 50% of overall serviced AUM. Comprehensive product offering and strong execution capabilities have empowered CAMS’ to win 6 out of 8 recent mandates in domestic MF-RTA; incl. recent win of Unifi Capital. Further, new players (Alchemy, Emkay, Jio) are expected to enter industry. 

Share of Non-MF revenues to increase further: 

Notwithstanding strong revenue growth in domestic MF business; share of non-MF business has increased to 13% from 9% YoY. CAMS’ expect non-MF business to grow faster and its share to increase to 20% by FY27. Amongst new segments, CAMS is most bullish on Alternates, KRA, Think360 businesses. In Alternate business, growth is to be driven by industry growth and increasing share of outsourcing within industry. 

Yields and Margins:

CAMS’ shared that yields declined sharply due to the impact of contract renegotiation with large MF. Since, contract was for longer timeframe (5 years), pricing terms were at premium to other customers and therefore yield readjustment was undertaken. Further, there are no contracts where CAMS foresee similar risk in near term. On Ebitda margins, CAMS guided it to be range-bound at existing levels of 43-45%.