Why CAMS Share Price is Falling

If something bad happens for a long time, it hurts. But if something bad happens after a glimpse of how good things can be, it is heart-breaking.

Just like the Indian stock market investors' hearts are broken right now. The BSE Sensex crossed the long-awaited mark of 60,000 last week, only to correct in the next couple of days.

The Sensex is falling again and investors on Dalal Street have been rattled by this sudden decline. The markets are again having mood swings.

In this volatile period, even fundamentally strong stocks like CAMS have been falling.

We recently wrote about monopoly stocks trading at big discounts. CAMS was part of it.

On a YTD basis, the share price of CAMS is down by 17%.

But is market volatility the only reason for CAMS falling? We don't think so.

Read on to find out the other reasons responsible for CAMS share price falling.

#1 Reducing Profits

Recently, CAMS declared its Q1 results.

For the quarter ended June 2022, CAMS reported revenue of Rs 2,297.3 m. This is 3.6% higher compared to the same quarter last year, while it is 1.5% lower compared to last quarter.

Net profit came in at Rs 626.3 m. This is 25% lower compared to the same quarter last year, and 7.8% lower compared to the last quarter.

CAMS has now reported a decline in profit for two consecutive quarters. This is a sign of caution for investors. Hence the share price is also declining.

#2 Promoters Reducing Stake

On Friday last week, CAMS' promoter company Great Terrain Investment divested a 3.8% stake.

The transaction garnered Rs 4.3 bn through an open market transaction. Great Terrain Investment offloaded a total of 1.9 m shares, amounting to a 3.8% stake in CAMS.

This is not the first instance where the promoters have sold stake. The promoters have been reducing their stake in CAMS since December 2021.

In December 2021 promoters held a 31% stake in CAMS, which gradually reduced to 23.7% in June 2022.

A sell-off by promoters is perceived to be a lack of trust in the company. If promoters do not trust the company to do well, why would anyone else trust the company?

Even mutual funds have reduced their stake. In December 2020, mutual funds held a 14% stake in CAMS which has reduced to 6% in June 2022.

It appears a few bulk deals in the stock by institutional investors has brought volatility.

For more details, see the latest shareholding pattern of CAMS.

Investment Takeaway

CAMS is a mutual fund transfer agency serving Indian asset management companies (AMCs). The company was incorporated in 1988.

It helps process transactions of active mutual funds. To record and maintain these transactions, CAMS puts its system to a stress test at high volumes. It also ensures the system's security is tested by Big Five accounting firms.

CAMS is co-owned by NSE Strategic Investment Corporation Limited (NSESIC).

CAMS serves over 60% of assets in the mutual fund industry and provides services to more than 15 Mutual Fund houses.

Thus, it can be seen that CAMS has very good business. As CAMS has a strong foothold in the mutual fund industry, it scores well on all the return ratios.

With steady revenues and growing profits, the company has been able to grow its return ratios over the years.

The company's fundamentals and prospects remain strong. It is moving towards being a technology product company for mutual fund services rather than being a tech enabled service provider.

For more details, see the CAMS company fact sheet and quarterly results.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...