Release Date: February 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Computer Age Management Services Ltd (BOM:543232, Financial) won the mutual fund RTA mandate of Unifi Capital, adding to its significant new logo wins in the mutual fund arena.
- The company's mutual fund assets under management (AUM) grew by 22% year-on-year, reaching INR33.95 trillion, with a market share of 68.2%.
- Equity AUM grew by 31% year-on-year, significantly outpacing the industry's 24% growth, and the company's equity AUM market share increased to 66%.
- Non-mutual fund businesses grew by 59% year-on-year, with four out of six non-MF businesses growing by more than 20%.
- The company reported a 19.7% year-on-year growth in EBITDA, with the EBITDA margin reaching a historical high of 44.8%.
Negative Points
- Despite the strong growth in non-MF businesses, the profitability of these segments remains lower, with non-MF EBITDA margins still under 15%.
- The insurance repository business, particularly the EIA segment, is not yet profitable and is close to breakeven.
- The company continues to face yield compression in its mutual fund business, although it has stabilized in the recent quarter.
- There is a significant gap between the company and the market leader in the KRA business, and it may take time to close this gap.
- The company's investments in new initiatives and platforms, such as Bima Central and account aggregator services, are ongoing and may continue to impact short-term profitability.
Q & A Highlights
Q: Can you provide a split between the costs for the core MF RTA business and the non-MF business?
A: The non-MF business investments are around INR 5-6 crores per quarter, focusing on platforms like Bima Central, AA, TSP, and CRA. The revenue from these investments is increasing, leading to higher profitability in the non-MF segment, which is now in the high single digits to low teens.
Q: What is driving your ability to enter into new relationships with fintech in the KRA business?
A: The expansion into brokerages and fintechs, beyond just mutual funds, has significantly increased our market reach. Our product differentiation, including features like 10-minute KYC, has helped us onboard high-potential customers and grow revenue by 100%.
Q: How should we think about future investments in non-MF initiatives?
A: We will continue to invest around INR 15-20 crores annually in non-MF initiatives, focusing on product development and market expansion. The revenue from these investments is expected to grow, making them more revenue accretive over time.
Q: Can you provide an outlook on EBITDA margins for MF and non-MF businesses?
A: The non-MF business margins have improved to around 15%. We expect these margins to increase to around 25% as revenue ramps up. Overall, we anticipate a 20-30 basis point improvement in EBITDA margins over the next few quarters.
Q: How do you see the AIF and CAMSPay businesses evolving?
A: Both businesses are showing strong growth. AIF won 32 new clients, and CAMSPay registered significant revenue growth. We expect these businesses to continue growing, driven by new product introductions and market expansion.
Q: What is the potential market size for the EIA and alternatives businesses?
A: The EIA business has a potential market of 55 crore policies, with only 3 crore currently addressed. The alternatives business has around 1,000 registered AIFs, with significant potential for outsourcing and new client acquisition.
Q: Can you provide more details on the fund accounting business?
A: We are using the Multifonds platform to enhance our fund accounting capabilities, particularly for multicurrency reporting. This will help us scale the business and offer more comprehensive services to our clients.
Q: How do you characterize the recurring nature of non-MF revenues?
A: Most non-MF revenues are recurring in nature, driven by transaction-based services like KRA, CAMSRep, and CAMSPay. Only about 10-15% of non-MF revenues are project-based.
Q: What are the ongoing investments in the account aggregator business?
A: We are enhancing the platform to make it more efficient for onboarding new customers. This includes rationalizing costs and improving scalability. The platform is in a good shape for monetization, with significant growth potential.
Q: Can you provide the period-end AUM figures?
A: The period-end AUM was on an increasing trajectory, with the average AUM being much less than the period closing AUM. We will provide the exact numbers separately.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
