MUMBAI:
Private equity
(PE) giant
Warburg Pincus
has made a late bid for India’s largest mutual fund registry and share transfer agent —
Computer Age Management Services
(CAMS). The move comes at a time when rival investors Partners Group and True North are also making a joint offer, valuing the Chennai-based company at about Rs 3,400 crore. US-based
TA Associates
is the third bidder in the final fray, even as
CAMS
awaits a decision by regulator
Sebi
on
PE
ownership of
market infrastructure institutions
(MIIs), people directly aware of the matter said.
The offers from Warburg and the Partners-True North combine are said to be aggressive, but the unfolding regulatory views on the deal-making could tilt the scales in the next few weeks. Last month, TOI was the first to report that Sebi could impose a cap on PE shareholding in MIIs or allow them to take controlling ownership with a minimum lock-in period. Sebi is expected to formalise views on the matter as it decides on an application filed by General Atlantic to buy majority stake in
Karvy Computershare
, a transaction announced in August this year.
NSE Strategic Investment Corporation (45%), HDFC group (20%) and founder V Shankar-led Acsys Investments (35%) together own the two-decade-old CAMS, which offers services to 15 top mutual funds managing 60% of the total industry assets in excess of Rs 21.4 lakh crore ($331 billion). The domestic mutual fund industry has stayed buoyant in recent quarters with the year-to-date net inflows till October at nearly Rs 5 lakh crore, translating into a 30% yearly growth rate.
The company has expanded services to include banks, insurance and microfinance companies in recent years. NSE and other shareholders are likely to sell 45% initially and decide on divesting majority shares only after Sebi comes up with guidelines on private equity ownership. Both CAMS and Karvy are categorised as MIIs, entities which are strategically important for the smooth running of the financial markets.
American private equity majors Warburg Pincus and TA Associates are making solo bids as global investors are betting on the growth potential of the Indian asset management and corporate shareholder services industry. Rothschild is running the sale process after NSE decided to unlock some of its non-core investments ahead of its proposed initial public offer (IPO). A preferred bidder is likely to be selected within a month. NSE emerged as the largest shareholder when it acquired shares from Advent International in 2014.
NSE declined to comment and CAMS could not be reached for immediate comments.
Domestic insurance regulator IRDAI is close to allowing PE firms to pick up majority stakes in insurance companies through an SPV structure with a five-year lock-in period. This may tilt the scales in favour of these entities to acquire controlling stakes in MIIs as well. “After the IRDAI nod, it would be difficult for Sebi to take a contrarian view and say no to PEs buying majority stakes in these entities,” said a market source.
A consortium of ChrysCapital and Multiples Asset Management had also evaluated acquiring CAMS before dropping the bid. Similarly, Carlyle Group and Apax Parters were among the other serious suitors before the fray narrowed down to the current three bidders. The net revenue of CAMS is estimated at Rs 550 crore with private equity offers effectively valuing the company at over 15 times the operating profit of around Rs 200 crore. CAMS also provides PAN facilitation centres, besides being a GST Suvidha provider.
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