IndiaNivesh has shut its Portfolio Management Services (PMS) business citing ongoing market volatility amid the novel coronavirus pandemic.
The firm’s Managing Director Sandeep Jain, in an email to PMS investors on March 29 said: "In view of the current market volatility pursuant to the global outbreak of COVID-19 and its long term impact on our business, we have decided to close our operation at IndiaNivesh Investment Managers Pvt. Ltd., a SEBI registered portfolio manager. Thus our sole strategy of Sprout Portfolio will be wound up".
Jain added that "consequently, all assets in our custody (securities, bank balance, etc.) shall be handed over” to clients. Jain added that clients had two options under which we could transfer assets to your designated bank account/demat account.
In the email to clients, Jain said that the first option would be liquidation of all shares held in the strategy and transferring of proceeds along with cash balance to the bank account. The second option will be to transfer shares to a demat account (other than the one opened for PMS with IL&FS) and cash/liquid funds to client's bank account. However, the Client Master List (CMR) of the respective demat account will be required for the transfer of shares.
Jain also said that clients may have to face delay in the process of handing over of shares and cash, and closure of their PMS account due to the ongoing nationwide lockdown.
A sub-broker of IndiaNivesh told Moneycontrol, "We are facing pay in-pay out problem on retail fronts also. But the company is assuring us, that there would not be problem except this PMS segment".
As per market sources, the firm incurred losses in its investment in shares of a large retail firm, which is said to be close to defaulting on its loan repayments.
Last week, when Moneycontrol approached the company, it had said: "Jaipur and Chennai are main markets for us and both are in lockdown. So we are not able to get cheques from clients, which will settle down by Monday".
Another sub-broker told Moneycontrol: "They have not defaulted on exchange pay-in-pay out. But they might be managing pay in-pay out with clients’ money. As they are not paying us, let us see when situation will settle down. We have our finger crossed".
In a statement, the firm however said: "As regards, broking operations, we are regular in meeting all the exchange obligations, however there have been some delays in releasing the pay outs due to current lockdown (although broking operations are exempted from the lockdown, the critical staff are not able to reach the office for carrying out the smooth operations).
We also deny all the rumours/speculations about our associations with any group whatsoever."
The Securities and Exchange Board of India (Sebi) is also monitoring the situation regarding brokers and especially those who have probability of defaulting.
Last year, Karvy and IL&FS Securities, two large brokerages and clearing firms had defaulted. However, more than 90 percent of Karvy’s investors had managed to receive their money back due to Sebi’s prompt action.