CAMS sees a 30% premium on the grey market ahead of the IPO

Mehta Equities and Rudra shares

Gray market premium is in the range of Rs 375-400 per share. It means its price band is 30.5-32.5 percent higher than the upper end. Mehta Equities and Rudra shares said.

Brokerage houses reported that the premium was higher than expected due to consistent revenue growth. With peers listed within the same industry and an experienced management team.

CAMS is the market leader with a 70% market share in the Duopoly market of registrars and transfer agents (RTAs). CAMS earns about 72% of AMC’s direct charge on its average asset management (AAUM).

Sherkhan

“The company has maintained an attractive level of 29-32 percent on its net worth over the last three years, and even for Q1 FY2021, RONW stands at 30.9 percent in the above range. The company’s value of 34.61x with its FY2020 EPS and diluted EPS growth has been healthy for the past three years,” Sherkhan said.

The brokerage said the market capitalization would be Rs 6,000 crore, according to the upper end of the price band.

NSE Investments has an offer to sell up to 1,82,46,600 equity shares in the IPO, which has prompted SEBI to waive its entire stake in Cams.

At higher prices, the issue size is Rs 2,244 crore. The company receives no income from the offer and all such proceeds go to the sales shareholder.

During FY17-20, CAMS recorded 13.5 percent revenue CAGR and 11.8 percent PAT CAGR. The return on equity (ROE) is in the range of 34-35 percent and the balance sheet has zero debt.

The company has capital sponsorship from Marquee investors such as Great Terrain (a subsidiary of Warburg Pincus), HDFC, HDFC Bank, and NSE Investments.

Kotak Mahindra Capital Company, HDFC Bank, ICICI Securities, and Nomura Financial Advisory and Securities (India) are the books running lead managers for this issue.