CAMS aims to be both a payment aggregator and a gateway, expanding into Education: MD

With strong retail sentiment, SIP is now at record levels. How is overall demand and client confidence looking? You in the second half of the year?

Anuj Kumar: From a fundamental level, the business looks set for strong and consistent growth trends that we have seen over the last four to six quarters. Overall, from the demand side, retail investors continue to participate through the SIP format. The monthly collection figures released by AMFI month-on-month, which in consecutive months is around Rs. 300 to 400 crores continues to grow, it is now over 20,000 crores.

At the CAMS level, the number of registered SIPs, which come to register to opt for new customers is more than 30 lakhs, about one lakh days. When we add all of that together and then look at the new business we won — AMC clients last year — we have about 75% of the net equity sales, to see how the overall assets are moving and aligning with that. A very strong foundational metric. Our investment in technology, talent and overall risk and compliance type dimensions, I think we are poised for growth this year as well. Of course, a lot will depend on the market. But we are upbeat and bullish.

We understand that RBI has also authorized you for online payment aggregator CAMSPay. Plus the Street expects you to go ahead and launch some new products around payments. Talk to us a little more about that. What new products are you planning?

Anuj Kumar: Payments have been a very specialized business. We have played mostly in the financial services sector and mostly with the capital markets, both mutual funds and brokerage, which accounts for about 50% of our franchise. The remaining 50% are insurance companies and people who have loan books like housing finance companies.

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We are now looking to expand into education as a potential, additional specialty that can grow the business. From a licensing perspective, this business was declared a licensed business in 2021, so think of it as more procedural. It does not add more dimensions to the business. But yes, we are moving towards being both a payment aggregator and a payment gateway and you will see some opportunities being created in the education sector.

What might be the contribution from non-MF business overall? Given the type of business you are doing in other businesses, let’s say 18 to 24 months is a perfect prospect.

Anuj Kumar: Last year, non-MF was up about 50% plus and of course, that was stratospheric growth for some reason. We are banking on non-MFs to grow around 30% this year, so you can see this growing around 40% to 50% over an 18-month period. But more importantly from a participatory perspective of the financial sector we now have a strong focus on capital markets through MF RTA, options and KRA.

But apart from that, through the account aggregator and through our push on insurance and through all the business that 360 has brought, I think we have a good structure of non-capital markets business as well. So, it leads to some diversification, opens up other segments and so we are confident that in about 18 to 24 months you will see about 50% revenue from the current levels that you would see on non-MF.

What the new launches and new product lines that we’re talking about actually do to your overall gross margin, and you’re also talking about the next year or two of product lines or offerings actually expanding, is there scope for your gross margin. ? Want to go up from here?

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Anuj Kumar: Company-level blended EBITDA margins are currently around 45% and historically, over the last four years, they have grown by around one percentage point per year. Our expectation is that that growth, margin expansion of about one percent per year in the EBITDA line, will continue for the next three to four years. There is a strong possibility that. It is supported by the core business, which continues to scale.

It also helps by generating revenue in non-MF businesses where we are ending the cycle where we were investing in the platform, so the platform is built and whatever it costs to go to market will continue. But we expect the non-MF revenue contribution to be in the range of 30% per annum, adding about 1% per annum on the EBITDA line for the next two to three years to the overall margin at the company level.

But what kind of top line growth do you envision?
Anuj Kumar: Last year we grew to the top company at around 24%. We expect to be over 20% this year. Much of that is just the effect of last year’s growth as the MF business and non-MF expanded almost quarter-to-quarter last year. On a longer scale, on a three to four year scale, we expect revenue growth of 15% to 16% consistently. Of course, market tailwinds and a lot of what happens in the capital markets will continue to affect how we grow. But on a broader scale, you can look at 15% to 16% revenue growth over the next four years.

In FY24, you managed to get 3 AMC commands – Angel One, Taurus and Unify. Any more in the pipeline right now? Also, how is the work of Gift City RTA progressing?

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Anuj Kumar: From the new MF perspective, the number of applicants has reduced significantly. This reads as about 10 plus at a time, most of them have received in-principle approval of those orders. There are one or two big guys still waiting for licenses and we are very hopeful of winning most of the new ones that come in but not a lot of them. They are only one or two.

From Gift City’s perspective, we have talked about expanding office space and headcount, so we are doing that. We will be inaugurating the new office in August. We are serving 17 customers in Gift City and we are seeing early signs of being able to double this number in the next 12-18 months.