SPFL to foray into portfolio management services

Kanpur-based commodity and share broking firm SPFL Ltd is diversifying into portfolio management services (PMS).

This is the first time that a local company is providing PMS and will also be doing equity research on its own.

Till now Kanpur only had marketing offices of large PMS managing companies like ENAM or Kotak. Also, there are some banks who provide these services for their high networth clients," said Padam Jain, managing director, SPFL Ltd.

"We started it around four months ago and hope to do business worth Rs 10 crore in the next two years. We have followed Securities and Exchange Board of India (Sebi) rules and have kept Rs 500,000 as minimum portfolio, while most others have kept it at Rs 2000,000 to Rs 2500,000," Pradeep Goenka, advisor, PMS division, SPFL Ltd, told Business Standard.

He said they were trying to evolve new products so that the return to investors were maximised. One of these is that the portfolio is invested in a mutual fund and when required it will be converted into an equity and then it may revert back again to the debt, depending on the situation. These conversions can take place once in three"�four months.

In fiscal 2006-07 SPFL did a business of Rs 36,000 crore as compared with 2005-06 when it did business worth Rs 25,000 crore. "It was mostly shares business," said Jain which contributed about Rs 33,000 crore and the remaining Rs 3000 crore came from commodities.

"However, now we propose to rapidly increase commodity business. Besides commodities, another area of expansion are the branch network. Within this year, we plan to increase the number of branches from 70 to 100," he said.

"We are strong in Uttar Pradesh and our goal is to saturate the state so that it can also earn on the bourses as the investors are earning in Maharashtra and Gujarat. Besides, we now have diversified into Madhya Pradesh, Gujarat and Rajasthan with offices in Mumbai and Kolkata. In our expansion we have generally followed the franchise model and directly administered branches are barely ten per cent of the total," he said.

When asked about the kind of impact of restriction on trading in a few, Jain said those commodities whose supply was short should not be allowed for forward trading as it would lead to massive volatility.

"We should have forward trading only in those commodities like gold, silver and petroleum which are governed by international prices. But at the moment there are more restrictions on the share business then on the commodities. This is damaging," Jain added.

SPFL is facing heat from the bigger players in the broking business. Jain said profits from broking have declined by four to five times. "There has been a squeeze on profits. Companies like Indian Bulls provide finances to their clients which we are unable to do," he said.

In the last fiscal, the company earned a gross broking income of about Rs 10 crore and its own share came to Rs 2 crore of net profit, slightly above what it recorded in the fiscal 2005-06.

Meanwhile, SPFL has no plans for an IPO. Jain said issues worth Rs 750,00 crore are slated to hit the market therefore any small issue of initial public offering is not going to make any impact on the market.