The minimum net worth requirement for portfolio management service (PMS), recommended by the Securities and Exchange Board of India (Sebi) Committee on Review of Eligibility (CORE), has not gone down well with market participants. Participants feel the proposed norms are impossible to implement. The committee had proposed that the net worth of PMS players must be at least 50 times its assets under management (AUM), subject to a minimum of Rs 2 crore. In 2008, the regulator had increased the net worth requirement for all PMS providers from Rs 50 lakh to Rs 2 crore. The step was intended to keep out non-serious players.

Since there is an absence of any concept of discretionary and non-discretionary PMS as prevalent in overseas markets, the Sebi committee mentioned in the report that there was a need to peg the net worth to AUMs.

?The logic behind the recommendation is to protect investor interest,? said Hiren Dhakan, associate fund manager, Bonanza Portfolio, adding that the move if implemented will result in market share moving towards bigger players with easy access to capital and would weed out smaller players from the market.

However, others felt the current recommendations will hit the PMS industry as it will be very difficult to implement. ?It is absolutely ridiculous,? commented the head of a leading PMS firm, which manages a portfolio worth over Rs 1,000 crore. He said that a firm managing a portfolio of Rs 1,000 crore will need a net worth of Rs 50,000 crore under the proposed norms. ?Why will a firm with a net worth of Rs 50,000 crore manage a portfolio of just Rs 1000 crore,? he asks.

There are around 237 Sebi registered PMS providers in India. While a majority of the small and medium firms manage portfolio in the range of Rs 1 crore to Rs 100 crore, larger firms manage portfolio worth over Rs 500 crore.