Feasibility study of portfolio management service; Godrej Soaps Limited

Abstract

After the SEBI (Portfolio Managers) Rules and Regulations, 1993 the PMS market has undergone a major restructuring. Many of the old players have abandoned their operations and at the same time many new companies are fancying an entry into this field. GSL is also contemplating launching a Portfolio Management Scheme considering the potential for garnering funds, mainly from its employees and those of its associate companies, through an investment mobilization scheme. Feasibility of such a scheme depends on how much loyalty is enjoyed by the company among its employees in particular and public in general, and how much of it can be transformed in the form of investments in company's Portfolio Management Service. Company can look forward to capitalizing on its strengths like the corporate image of the Godrej group and financial backup from the group. The major limitations that the company faces are its lack of experience, expertise and infrastructure required for offering a Portfolio Management Service. In addition it faces a competitive disadvantage with respect to other companies in this field, most of which are part of large finance houses and thus have advantage of a well established clientele and higher economies due to resource-sharing among different services provided by them. Offering a Portfolio Management Service requires building a market intelligence system, a marketing & external interface system and operations & administrative systems, besides complying with the legal requirements like registration with SEBI etc. Main players in the PMS market are NBFCs like J.M. Share & Stock brokers, Kotak Mahindra Finance Ltd. etc. However for the target group under consideration the main competition that the company will face is not from other Portfolio Managers but from other uses of investible surplus, if any, available with these employees. To find out the feasibility of GSL offering a Portfolio Management Service, an exploratory study of the present PMS market and the various schemes therein was carried out, the statutory framework governing this service was studied, operational and infrastructural requirements for the service were studied and senior managerial level employees of GSL were interviewed.