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KARVY CAPITAL LIMITED
PORTFOLIO MANAGEMENT SERVICES
DISCLOSURE DOCUMENT
[As required under Regulation 14 of SEBI (Portfolio Managers) Regulation, 1993]
1. This document supersedes the Disclosure document dated March 1, 2019 filed with
Securities and Exchange Board of India (SEBI) on March 5, 2019.
2 This Disclosure Document has been filed with SEBI along with the certificate from
independent chartered accountant in the prescribed format in terms of Regulation
14 of the SEBI (Portfolio Managers) Regulations, 1993 as amended till date.
3 The purpose of this Disclosure Document is to provide essential information about
the portfolio management services offered by Karvy Capital Limited in such manner
as to assist and enable the investors in making informed and considered decision for
engaging Karvy Capital Limited as a Portfolio Manager.
4 This document contains the necessary information about the Portfolio Manager
required by an investor.
5 Karvy Capital Limited is permitted to provide Portfolio Management Services
pursuant to its registration as a Portfolio Manager with SEBI vide Registration
number INP000004524 dated March 23, 2017 which registration shall be valid unless
it is suspended or cancelled by SEBI and is subject to payment of renewal fees to
SEBI from time to time
6 Investors should carefully read this entire document before making a decision to
avail portfolio management services from Karvy Capital Limited and retain this
document for future reference. Any other relevant information may be provided
upon request.
7 No person has been authorized to give any information or to make any
representations not confirmed in this draft Disclosure Document in connection with
the services proposed to be provided by the Portfolio Manager, and any information
or representations not contained herein must not be relied upon as having been
authorized by the Portfolio Manager.
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8 The Principal Officer designated by Karvy Capital Limited, the Portfolio Manager is:
Name of the Principal Officer Mr. PHANI SEKHAR PONANGI
Tel No: 022 6149 1500
Email : [email protected]
Address: 702, Hallmark Business Plaza,
Sant Dnyaneshwar Marg,
Bandra (E), Mumbai 400 051
9 This disclosure document is dated September 16, 2019
Portfolio Management Services KARVY CAPITAL LIMITED
INDEX
Sr No Contents Page
Number
1 Disclaimer 4
2 Definitions 4 - 8
3 Description - The Portfolio Manager 9
i History, Present Business and background of the Portfolio Manager.
9
ii Promoters of the Portfolio Manager, Directors and their background. 10-13
iii Details of the top 10 group companies of the Portfolio manager
based on turnover as on March 31, 2019 [Based on latest audited
financial statements]
13
4 Penalties/Pending Litigations/Proceedings etc 14
5 Services offered 14 - 17
6 Risk Factors 17 -22
7 Client Representation 22-23
i Category of clients as on August 31, 2019 22-23
ii Complete disclosure in respect of transactions with related parties as
per the standards specified by the Institute of Chartered
Accountants of India as on March 31, 2019
23
8 Financial Performance of Portfolio Manager, Karvy Capital Limited 23 - 24
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[Based on audited financial statements]
9 Portfolio Management Performance of the Portfolio Manager for last
3 years
25 – 26
10 Nature of Expenses 27 – 28
11 Taxation 28 – 33
12 Accounting Policies 33 – 34
13 Investor Relations officer 35 – 36
14 Grievances Redressal 35
15 Dispute Settlement Mechanism 35
16 General 36
Section 1: DISCLAIMER
This document has been prepared in accordance with the Securities Exchange Board of India
(Portfolio Managers) Regulations, 1993, as amended from time to time and other circulars
issued by SEBI from time to time and has been filed with SEBI. This Document has neither
been approved nor disapproved by SEBI nor has SEBI certified the accuracy or adequacy of
the contents of this Document.
This information is not for public distribution and has been furnished to you solely for your
information and may not be reproduced or redistributed to any other person.
Section 2: DEFINITIONS
In this Agreement, unless otherwise clearly indicated by or inconsistent with the context, the
following expressions shall have the meaning assigned to them hereunder respectively:
“Act” – means the Securities and Exchange Board of India Act, 1992.
“Agreement” means the agreement that shall be entered between Karvy Capital Limited, the
Portfolio Manager and the client for the management of funds or securities of the client in
terms of Regulation 14 of the SEBI (Portfolio Managers) Regulations, 1993 and SEBI (Portfolio
Managers) Amendment Regulations, 2002 issued by the Securities and Exchange Board of
India and as may be modified from time to time and shall include all schedules and
annexures thereto and shall also include all modifications, alterations, additions or deletions
made thereto in accordance with the terms thereof.
“Board” means the Securities and Exchange Board of India.
“Bank Account” means one or more bank accounts opened, maintained and operated by
the Portfolio Manager in the name of clients or a pool account in the name of the Portfolio
Manager in which the funds handed over by the client shall be held by the Portfolio Manager
on behalf of the Client.
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“Chartered Accountant” means a chartered accountant as defined in clause (b) of sub-
section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) and who has
obtained a certificate of practice under sub-section (1) of section 6 of that Act.
“Client” means any body corporate, partnership firm, Limited Liability Partnership,
individual, HUF, association of person, body of individuals, trust, statutory authority, or any
other person who enters into agreement with Karvy Capital limited, the Portfolio Manager
for availing the Portfolio Management Services
“Custodian” means any person who carries on or proposes to carry on the business of
providing custodial services in accordance with the regulations issued by SEBI from time to
time. The Portfolio Manager has, effective September 5, 2018, appointed Orbis Financial
Corporation Limited as Custodian for settlement of funds, securities and corporate benefits
in the portfolio of clients.
“Depository” means Depository as defined in the Depositories Act, 1996 (22 of 1996) and
currently includes National Securities Depository Limited (NSDL) and Central Depository
Services (India) Limited (CDSL).
“Depository Account” means any account of the client or for the client with an entity
registered as depository participant under sub-section 1A of Section 12 of the Act or any
other law for the time being relating to registration of depository participants in which the
securities comprising part of the Portfolio of the Client are kept by the Portfolio Manager.
“Discretionary Portfolio Management Services” means the discretionary portfolio
management services to be rendered to a Client by Karvy Capital Limited, the Portfolio
Manager pursuant to the terms and conditions contained in the Portfolio Management
Services Agreement, where under the Portfolio Manager exercises absolute and unfettered
discretion, with regards to the investments and management of the portfolio of securities or
the funds of the client, as the case may be.
“Disclosure Document” means this draft disclosure document for offering Portfolio
Management Services.
“Financial year” means the period of twelve months commencing on 1st April every year and
ending on 31st March of the following year.
“Funds” means the monies placed by the Client with the Portfolio Manager and any
accretions thereto and also includes any further monies placed by the client with the
Portfolio Manager to be managed pursuant to the Agreement, the proceeds of the sale or
realization of the portfolio and other monies so long as the same is being managed by the
Portfolio Manager.
“Funds managed” means the market value for the equity portion of the Portfolio of the
Client and for the debt portion of the Portfolio of the Client, it means market value where
available or the sum total of the investment value viz cost and accrued interest/ redemption
premium/ amortization of premium/ discount as applicable as on date.
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“Fund Manager” (FM) means the individual/s appointed by the portfolio manager who
manages, advises or directs or undertakes on behalf of the client (whether as a discretionary
portfolio manager or otherwise) the management or administration of a portfolio of
securities or funds of the client, as the case may be.
“Initial Corpus” means the value of the funds and the market value of securities brought in
by the client and accepted by the Portfolio Manager at the time of registering with the
Portfolio Manager for the portfolio management services In case the Initial corpus brought in
by the Client is in the form of securities, it shall be valued at the closing market price of such
securities, prevailing on recognised stock exchange [NSE/ BSE (only if security is not listed on
NSE)] on the previous working date of activation of client’s portfolio management account
by the Portfolio Manager or of the previous working day of the transfer of such securities
from client’s account to the Depository account whichever is later.
In case the initial corpus is in form of Debt, debt instruments will be valued at the market
value of the debt instrument as on cut off date (or) the latest available price on the relevant
exchange or the most recent NAV will be reckoned and where market value is not available /
ascertainable, the debt instruments will be valued at the sum total of the investment value
viz cost and accrued interest/ redemption premium/ amortization of premium/ discount as
applicable as on date.
For illiquid securities, the valuation may be provided by the issuer on a periodic basis and/or
calculated as required by the portfolio manager – basic consideration being the residual
tenor amount.
The Portfolio Manager shall not accept from the client/ client(s), in case of joint holding
funds or securities worth less than Twenty five lakh rupees.
“Investment Advisory Services” means the non exclusive, non binding services, where the
Portfolio Manager advises Clients on investments in general or gives specific advice
required by the Clients as agreed upon in the Agreement. Advice, whether general or specific
is non-binding in nature and it is entirely at client’s discretion to follow the advice.
“Non-Discretionary Portfolio Management Services” means the non-discretionary portfolio
management services to be rendered to a Client by the Portfolio Manager on the terms and
conditions pursuant to the Agreement, where under the Portfolio Manager invests and
manages the Funds of the Client based on the instructions of the Client.
“Net Asset Value” or “NAV” means the value of the Assets managed by the Portfolio
Manager, as calculated by the Portfolio Manager from time to time, depending on the
Strategy chosen by the Client.
Under section 2(76) of the Companies Act, 2013 - “Related Party” with reference to a
company, means—
(i) a director or his relative;
(ii) a key managerial personnel or his relative;
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(iii) a firm, in which a director, manager or his relative is a partner;
(iv) a private company in which a director or manager is a member or director;
(v) a public company in which a director or manager is a director or holds along with his
relatives, more than two per cent. of its paid-up share capital;
(vi) anybody corporate whose Board of Directors, managing director or manager is
accustomed to act in accordance with the advice, directions or instructions of a director or
manager;
(vii) any person on whose advice, directions or instructions a director or manager is
accustomed to act:
Provided that nothing in sub-clauses (vi) and (vii) shall apply to the advice, directions or
instructions given in a professional capacity;
(viii) any company which is—
A. a holding, subsidiary or an associate company of such company; or
B. a subsidiary of a holding company to which it is also a subsidiary;
(ix) such other person as may be prescribed;
“Portfolio” means the total holdings of securities and / or funds belonging to the client.
“Portfolio Manager” (PM) means Karvy Capital Ltd., a company incorporated under the
Companies Act, 1956 and registered with SEBI as a Portfolio Manager in terms of SEBI
(Portfolio Managers) Regulations 1993 vide registration no. INP000004524 and having its
Registered Office at its PMS dealing office at 702, Hallmark Business Plaza, Sant
Dnyaneshwar Marg, Bandra (E), Mumbai 400 051[but may add more dealing offices in
future] and who pursuant to a contract or arrangement with a client, advises or directs or
undertakes on behalf of the client (whether as a discretionary Portfolio Manager or
otherwise) the management or administration of a portfolio of securities or the funds of the
client, as the case may be.
“Portfolio Management Services” means the Discretionary Portfolio Management Services,
and/or the Non-Discretionary Portfolio Management Services, and/or the Investment
Advisory Services, as the case may be.
“Portfolio Value” means the aggregate of the Portfolio Funds and Value of Portfolio
Securities.
“Principal Officer” means a director/an employee of the portfolio manager who is
responsible for the activities of portfolio management and has been designated as principal
officer by the portfolio manager.
“Regulations” – means the Securities and Exchange Board of India (Portfolio Managers)
Regulations, 1993, as amended by SEBI from time to time and includes Securities and
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Exchange Board of India (Portfolio Managers) Amendment Regulations, 2012, and rules,
guidelines or circulars issued in relation thereto from time to time.
“Strategy” means any of the Portfolio Investment categories mentioned herein or that may
be introduced by the Portfolio Manager from time to time. The Term Strategy may be
interchanged with Plans/Products/Options.
“SEBI” means the Securities and Exchange Board of India established under sub-section (1)
of Section 3 of the Securities and Exchange Board of India Act, 1992.
“Securities” means securities as defined under the Securities Contracts (Regulation) Act,
1956 and includes:
(i) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable
securities of a like nature in or of any incorporated company or other body
corporate
(ia) derivative;
(ib) units or any other instrument issued by any collective investment Strategy to the
investors in such Strategies;
(ic) security receipt as defined in clause (zg) of section 2 of the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;
(id) units or any other such instrument issued to the investors under any mutual fund
Strategy;
(ii) Government securities;
(iia) such other instruments as may be declared by the Central Government to be
securities; and
(iii) rights or interest in securities.
A descriptive, but not the exhaustive list of “Securities” is given hereunder:
Shares (whether dematerialized or otherwise), derivatives (futures and options, Interest rate
swaps & Forward rate agreements etc), scrip, stocks, bonds (whether dematerialized or
otherwise), warrants, convertible debentures (whether dematerialized or otherwise), non-
convertible debentures (whether dematerialized or otherwise), securitised debt (whether
dematerialized or otherwise), fixed return investments, floating rate instruments linked to
MIBOR/ call money etc., equity shares and equity linked instruments or other marketable
securities of a like nature in or of any incorporated company or other body corporate,
negotiable instruments, including usage bills of exchange, trade bills, deposits or other
money market instruments, derivatives, commercial paper, certificates of deposits, units
issued by Unit Trust of India, units issued by Mutual Funds, units issued by SEBI registered
Alternative Investment Funds, mortgage backed or other asset backed securities issued by
any institution or corporate, cumulative convertible preference shares issued by any
incorporated Company and securities issued by the Central Government or a State
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Government , Pass Through Certificates , RBI auctions, open market sales conducted by RBI
or any other securities that may be issued from time to time.
“Securities lending” means the securities lending as per the Securities Lending Scheme, 1997
and related guidelines specified by SEBI.
“Structured Products” means products returns on which may be linked to Equity Index, Debt
instruments, Non Convertible Debentures and may also be based on Basket of stock, index or
stock futures with pre-defined capital protection. These are normally third party products.
The terms that are used herein and not defined herein, except where the context otherwise
so requires, shall have the same meanings as are assigned to them under the Act, the
Regulations or the Rules.
Words importing the singular include the plural and vice-versa. Words importing a gender
include the other gender.
Section 3 DESCRIPTION
i. HISTORY, PRESENT BUSINESS AND BACKGROUND OF THE PORTFOLIO MANAGER :
Karvy Capital Limited, a wholly owned subsidiary of Karvy Stock Broking Limited, was
incorporated under the Companies Act, 1956 as amended from time to time as a Private
Limited Company on December 31, 1981 with the name ‘Grant Holding and Trading
Company Private Limited’. On June 30, 2011, the name of the company was changed to
Karvy Capital Private Limited. The name of the company was further changed from Karvy
Capital Private Limited to Karvy Capital Limited with effect from February 8, 2012 and
presently Karvy Capital Limited is a Public Company domiciled in India.
Karvy Capital Limited has its Registered Office at 702, Hallmark Business Plaza, Sant
Dnyaneshwar Marg, Bandra (E), Mumbai – 400051.
Karvy Capital Limited is an Asset Management Company offering Portfolio Management
(PMS) and Alternative Investment (AIF) Services.
Karvy Capital Limited has been registered with Reserve Bank of India (‘RBI’) to carry on the
business of non-banking financial institution with effect from March 24, 1998.
Karvy Capital Limited is also acting as a Sponsor and Manager to Karvy Capital Alternative
Investment Fund (Trust) for which it has obtained Category III License on April 10, 2013.
Karvy Capital Limited is registered with SEBI as a Portfolio Manager vide registration number
INP000004524.
Karvy Capital Limited started proprietary trading in August 2010 with a focus on Quantitative
and Absolute Return strategies. Currently, Karvy Capital Limited acts as an Investment
Manager to Karvy Capital Alternative Investment Fund – a category III Alternative Investment
Fund.
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Karvy Capital Limited also has a retail debt business and acts as a facilitator for structured
finance deals. Karvy Capital Limited is also a direct sales associate and main distributor to the
various products and services being offered by Karvy Group.
Karvy Capital Limited aims to be a reputable asset manager providing comprehensive
investment solutions across asset classes to its investors. To diversify the set of offerings,
Karvy Capital Limited intends to provide customized and focused portfolio management
solutions to investors. These services would include discretionary portfolio management
services, non discretionary portfolio management services and advisory services.
Karvy Capital Limited is a group company of the Karvy Group, which is a premier integrated
financial services provider, and ranked amongst the leading corporate in the country in all its
business segments, servicing over millions of individual investors in various capacities, and
provides investor services to many corporates, comprising the who’s who of Corporate
India. KARVY group companies cover the entire spectrum of financial services such as Stock
Broking, Depository Participants, Distribution of financial products – mutual funds, bonds,
fixed deposit, equities, Insurance Repository , Commodities Broking, Personal Finance,
Advisory Services, Merchant Banking & Corporate Finance, placement of equity, IPOs,
services related to data management and Non Banking Financial company among others.
Karvy Group has a professional management team and ranks among the best in technology
and operations.
ii. DETAILS OF PROMOTERS,DIRECTORS AND THEIR BACKGROUND:
The directors of Karvy Capital Limited as on August 20, 2019 and their background are as
follows:
Name and age: Mr. Kedar Ramesh Deshpande, aged 46 years **
Designation: Whole-time Director.
Qualification: BE Civil Engineering and MBA Marketing
Experience (General and
specific Intermediaries
activity):
Mr.Kedar Ramesh Deshpande is having over 20 years of
experience across wide-range of financial services
including retail broking, banking, education, ecommerce
and market research . He is the founder Director of Repeat
Purchase India Pvt. Ltd., an ecommerce company and COS
and Financial Catalysts Private Limited, a sales finishing
schoolfor imparting training for retail BFSI sector.
He has been associated with ICICI group for a period of 7
years. He headed the retail broking business, commodities
segment, retail demat business. Has set up the retail
broking business at Edelweiss Financial Services Ltd. and
played a key role in designing website to give clients
simplified execution.
Date of appointment: August 10, 2015
Other directorships: Name of Company Date of appointment
Repeat Purchase India August 10, 2012
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Private Limited
Landmark Capital Advisors
Private Limited
October 6, 2016
Rupeeseed Technology
Ventures Private Limited.
January 13,2017
Previous Positions held: Country Head Retail Broking in Karvy Stock Broking Limited
prior to Business Head Retail Broking in Edelweiss
Financial Services Ltd and Deputy General Manager in ICICI
Bank Ltd.
** Mr Kedar Deshpande has submitted his resignation from the services of Karvy Capital
Ltd with last working day being 30th September, 2019.
Name and age: Mr. G. Krishna Hari, aged 61 years
Designation: Director
Qualification: Bachelors degree in Commerce and an associate member
of the Institute of Chartered Accountants of India (ICAI)
Experience (General and
specific Intermediaries
activity):
He has over 30 years of experience in the areas of finance
and accounts functions encompassing fund raising,
financial reporting, management accounting, working
capital management, budgeting and forecasting and
financial due diligence reviews for mergers & acquisitions
and investment proposals. He has been associated with
the Karvy Group for the past 20 years.
Date of appointment: September 27, 2012
Other directorships: Name of Company Date of appointment
Karvy Holdings Limited March 1, 2013
Karvy Financial Services
Limited
July 29,2016
Karvy Renewable Energy
Projects Limited
December 05, 2016
Previous Positions held: Prior to joining Karvy, he was the head of finance &
accounts division in Asia Pacific Investment Trust Limited,
Hyderabad (Formerly Nagarjuna Investment Trust Limited)
an NBFC Company.
Name and age: Mr. K.P. Jeewan, aged 51 years
Designation: Director.
Qualification: B.Com (Hons Accounts), MBA
Experience
(General and
He has over 25 years of experience in investment banking,
corporate finance, fixed income, forex/interest rate structured
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specific
Intermediaries
activity):
products. He was also associated as a Vice President in Kotak
Mahindra Bank Limited, as in charge of structured products desk of
the treasury. The assignment involved structuring Derivative
products (Forex and Interest rate) for Institutional clients.
Additionally, he has worked for about a year at Kotak Mahindra
Capital Company Primary Dealers in various capacities in
investment Banking & Fixed Income.
Date of
appointment:
May 29, 2015
Other
directorships:
Not Applicable
Previous
Positions held: Head of Fixed Income Division in Karvy Stock Broking Limited
Vice President and In charge of structured products desk of the
treasury and various capacities in investment Banking & Fixed
Income in Kotak Mahindra Bank Limited
Name and age: Mr. P. B. Ramapriyan, aged 52 years
Designation: Director.
Qualification: B.Com, PGDBA
Experience
(General and
specific
Intermediaries
activity):
He has been associated with Karvy for over 2 decades and his main
strength lies in capably handling the distribution of financial
products including Equity, Bonds, Fixed Deposits and Auto Finance.
He has successfully marketed several financial products for large
number of corporate of various sizes. He is also responsible for
managing the Pan India Network of brokers and sub-brokers..
Date of
appointment:
May 29, 2015
Other
directorships:
Name of Company Date of appointment
Karvy Realty (India)
Limited
August 31,2006
Karvy Investment
Advisory Services Limited
December 22,2015
Karvy Holdings Limited February 18,2016
Landmark Capital Advisors
Private Limited
October 6,2016
Previous
Positions held: Karvy Group - Distribution of Financial products
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Name and age: Mr. Rajiv Ranjan Singh, aged 49 years
Designation: Director.
Qualification: Cost & Management Accountant
Experience
(General and
specific
Intermediaries
activity):
He has more than a decade of experience in capital markets.
He has enormous experience in finance industry with capabilities in
building strategy, revenue generation, business development and
overall customer satisfaction. At Karvy presently he heads the stock
broking segment/vertical.
Date of
appointment:
May 29, 2015
Other
directorships:
Name of Company Date of appointment
Karvy Broking (IFSC) Limited February 7, 2017
Karvy Investment Advisory
Services Limited
March, 04, 2017
Previous
Positions held: Karvy Group- Vice President & Business Head of the Equity Broking
business. Prior to Joining Karvy, he has worked with M/s.K.M Gupta
& Co, Chartered Accountants.
iii DETAILS OF THE TOP 10 GROUP COMPANIES/ FIRMS BASED ON TURNOVER AS ON
MARCH 31, 2019
Name of the Company Nature of Business Status
Karvy Data Management
Services Ltd
1. SEBI Registered KRA;
2. Data Processing, Profiling and
related services provided to various
entities
Fellow subsidiary
company
Karvy Stock Broking
Limited #
1. SEBI registered Stock Broker 2. SEBI registered Depository Participant 3. SEBI registered Portfolio Management Services 4. Distribution of financial products
5. Wealth management services
Holding Company
Karvy Digikonnect Limited IT enabled services and providing
telecommunication services
Fellow subsidiary
company
Karvy Innotech Limited IT and allied services
Karvy Forde Search Private
Limited
Manpower Services Fellow subsidiary
company
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Karvy Realty (India) Ltd. RERA registered Real Estate Broker Fellow subsidiary
company
Karvy Financial Services
Ltd.
1. Registered with the Reserve Bank of India as a Non Banking Financial Institution without accepting public deposits; 2. Registered as Point of Presence (POP) – PFRDA
Fellow subsidiary
company
Sciknow Techno Solutions
Ltd
Manufacturing and supply of
computers, smart phones, software
development etc.
Fellow subsidiary
company
Karvy Comtrade Ltd # Commodity Broker registered with: 1. Multi Commodities Exchange, 2. National Commodities and Derivatives Exchange , 3. National Multi Commodity Exchange of India Limited , 4.NCDEX Spot Exchange Limited
Fellow subsidiary
company
Karvy Holdings Ltd Core Investment Company . Group company
# Since audit of these companies is not yet complete, the data pertaining to these companies
is provisional
Section 4: PENALTIES, PENDING LITIGATION OR PROCEEDINGS, FINDINGS OF
INSPECTION OR INVESTIGATIONS FOR WHICH ACTION MAY HAVE BEEN TAKEN OR
INITIATED BY ANY REGULATORY AUTHORITY
I All cases of penalties imposed by the Board
or the directions issued by Board under the
Act or Rules or Regulations made there
under
There are no penalties imposed or
litigation pending against the Karvy
Capital Limited. Details of litigations
pending against group companies/
associates of the portfolio manager
have been provided as Annexure B
to this document.
II The nature of penalty/direction Not Applicable
III Penalties imposed for any economic
offence and/or for violation of any
securities laws
Not Applicable
IV Any pending material litigation/legal
proceedings against the Portfolio
Manager/key personnel with separate
disclosure regarding pending criminal
cases, if any
Not Applicable
V Any deficiency in the systems and
operations of the Portfolio Manager
Not Applicable
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observed by the Board or any regulatory
agency
VI Any enquiry/adjudication proceedings
initiated against the Portfolio Manager or
its directors, principal officer or employee
or any person directly or indirectly
connected with the Portfolio Manager or
its directors, principal officer or employee,
under the Act or Rules or Regulations
made there under
Not Applicable
Section 5: SERVICES OFFERED
5.1 The Portfolio Manager offers the following three types of Services
a. Discretionary Services
The Portfolio account of the client is managed at the full discretion and liberty of Karvy
Capital limited, the Portfolio Manager.
Under these services, the choice as well as the timings of the investment decisions on an on-
going basis rest solely with the Portfolio Manager. The Portfolio Manager may at times and
at its own discretion, adhere to the views of the Client pertaining to the investment
/disinvestment decisions in the Client’s Portfolio. The Portfolio Manager shall have the sole
and absolute discretion to invest in respect of the Client’s account in any type of security as
per the Agreement and make such changes in the investments and invest some or all of
funds in the Client’s account in such manner and in such markets as it deems fit. The Client
may give informal guidance to customize the portfolio strategies; however, the final decision
rests with the Portfolio Manager. The securities invested / disinvested by the Portfolio
Manager for Clients in the same Strategy may differ from one Client to another Client. The
Portfolio Managers’ decision (taken in good faith) in deployment of the Clients’ account is
absolute and final and can never be called in question or be open to review at any time
during the currency of the agreement or any time thereafter except on the ground of
malafide, fraud, conflict of interest or gross negligence. This right of the Portfolio Manager
shall be exercised strictly in accordance with the relevant Acts, Rules, and Regulations,
guidelines and notifications in force from time to time.
Under these services, the Clients may authorize the Portfolio Manager to invest their Funds
in specific financial instruments or a mix of specific financial instruments or restrict the
Portfolio Manager from investing in specific financial instruments or securities. Periodical
statements in respect of Client’s Portfolio shall be sent to the respective Clients.
Details of the strategies being offered by the Portfolio Manager are contained in Annexure A.
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b. Non Discretionary
In Non-Discretionary Portfolio management, the Portfolio Manager would manage the
client’s portfolio in consultation with and as per the directions or consent of the client.
Under these services, the Clients decide their own investments with the Portfolio Manager
only facilitating the execution of transactions. The Portfolio Manager’s role would include
but not limited to providing research, structuring of clients’ portfolios, investment advice and
guidance and trade execution at the Client’s request. The Portfolio Manager shall execute
orders as per the mandate received or consent obtained from the Client. The deployment of
the Client’s Funds by the Portfolio Manager shall be as per the instructions or consent of the
Client. The rights and obligations of the Portfolio Manager shall be exercised strictly in
accordance with the Act, Rules and/or Regulations, guidelines and notifications in force from
time to time. Periodical statements in respect of Client’s Portfolio shall be sent to the
respective Clients. Details of strategies offered by the Portfolio manager under non
discretionary services can be viewed in Annexure A.
c. Advisory
Portfolio Manager will provide advisory services, as per the Regulations, which shall be in
the nature of investment advice and shall include the responsibility of advising on the
portfolio strategy, investment, disinvestment of the various securities in the client’s
portfolio, for an agreed fee, entirely at the client’s risk. The Portfolio Manger will render
the best possible advice to the client having regard to the client’s needs and the
requirements, using his own professional skills. This service will be purely of advisory in
nature under an agreed fee structure with the client. It is up to the client to accept the
recommendations/advice of Portfolio Manager and Portfolio Manager will not be held
responsible for any consequence arising out of acceptance of Portfolio Manager’s advice
under this service.
5.2 Present Investment Objective
The General Objective is to formulate and device the investment philosophy to
achieve long term growth of capital by investing in assets, which generate
reasonable risk–adjusted return . The actual portfolio management style will vary in
line with profile of each client with regards to his risk tolerance levels and specific
preferences or concerns. (The specific objective will be as mentioned in the
agreement with the client). The endeavour will be to select a diversified portfolio in
terms of exposure to various sectors and varied Industries within the sector . The
emphasis will be to Invest in companies with high Corporate Governance.
5.3 Types of securities
The Portfolio Manager/Fund Manager shall invest in all such types of Securities as
defined (kindly refer to the definition) and in all such Securities as permissible from
time to time.
Page 16 of 36
5.4 Investment in Group / associate companies
The Portfolio Manager/Fund Manager may invest in Securities of the
associate/group companies subject to the applicable laws/ regulations/ guidelines.
These investments will be carried out to achieve the investment objectives and
strategies and in the normal course of investment activity subject to the applicable
laws/regulations.
The Portfolio Manager / Fund Manager may invest in any unlisted securities of any
associate/group companies of the Portfolio Manager/ promoter. The Portfolio
Manager / Fund Manager may also invest in privately placed securities issued by
Associate/Group companies of the promoter.
5.5 Minimum Investment Amount
The Portfolio Manager shall not accept funds and/or securities from new clients,
cumulative value of which is less than Rupees Twenty Five Lakhs or as specified in
the agreement with the Portfolio Manager or as amended/specified in the SEBI
(Portfolio Managers) Regulations, 1993.
5.6 Conflict of Interest
Karvy Capital Limited, Portfolio Manager is also the Investment Manager to a
Category III Alternate Investment Fund (AIF). Since the entity is the same, the
management for both the portfolio management division and Investment
Management division remains the same. However, the personnel such as fund
manager(s), teams involved in order generation and execution will be independent
of the personnel involved in the same activity for portfolio management services.
Further, the services offered by the Investment Manager under the AIF offering and
the Portfolio Management services to clients are inherently very different. The key
difference is that as of now Portfolio management invests in low / unrated / low
rated debt instruments while the AIF invests in High Quality instruments. The AIF
fund will invest in high quality corporate, sovereign and tax-free bonds across
various maturities with high credit rating. Derivative transactions would also be
considered in these strategies. The PMS portfolio would primarily consist of debt
securities, preference capital, commercial paper, tax free bonds and pass through
certificates which may be listed or unlisted and would be of moderate quality.
Nonetheless, the management will provide their guidance and insight with relation
to monitoring of overall functioning of both the AIF and portfolio management
services and their broad macro views on the investment front shall be used for both.
Therefore there is no conflict of interest in both these activities.
The portfolio manager being an NBFC purchases securities as a part of its routine
business activity. These securities may be bought for investment or trading
purposes. Therefore Karvy Capital as discretionary portfolio manager may buy the
securities from Karvy Capital limited {NBFC}. These securities would be purchased at
Page 17 of 36
a price deemed fit by the portfolio manager and may also at times be at a premium
depending on the demand for the security. Additionally, depending on reasons such
as demand for the security prevalent at the time of purchase by Karvy Capital as
discretionary portfolio manager from itself as an NBFC , the portfolio manager may
get different prices for the same security. Effectively it is a possibility that the price
of the security bought by the portfolio manager in the above manner may differ
interse the clients of the portfolio manager on account of the same being bought at
different points of time. Karvy Capital Limited, discretionary portfolio manager shall
ensure that its rationale for all its decisions to purchase securities in the abovesaid
manner shall be documented and approved by its Investment Committee.
Section 6: RISK FACTORS
1. Investments in securities are subject to market risks including price volatility and
liquidity risk and there is no assurance or guarantee that the objectives of the
strategy will be achieved. The investment may not be suited for all categories of
investors. The past or present performance of these strategies does not indicate their
future performance.. With reference to appreciation on the portfolio, the investors
are not being offered any guaranteed returns through any of the strategies. The
Portfolio Manager also does not guarantee any capital protection for any strategy.
2. There are inherent risks arising out of investment objectives, investment strategy,
asset allocation and non-diversification of portfolio. The investment objective,
investment strategy and asset allocation may differ from client to client. However,
generally, highly concentrated portfolios with lesser number of stocks will be more
volatile than a portfolio with a larger number of stocks. Portfolios with higher
allocation to equities will be subject to higher volatility that portfolios with low
allocation to equities. Diversified portfolios (allocated across companies and broad
sectors) generally tend to be less volatile than non diversified portfolios. The names
of the various strategies do not in any manner indicate their prospects or returns.
3. Investment decisions made by the Portfolio Manager may not always be profitable
since actual market movement may be at variance with anticipated trends.
4. ETF may trade above or below their NAV. The NAV of ETF will fluctuate with changes
in market value of scheme’s holdings of underlying stocks. However, given that ETF
can be created and redeemed only in creation units directly with the Mutual Fund, it
is expected that large discounts or premiums to the NAVs of ETFs will not sustain due
to availability of arbitrage possibility. Any changes in trading regulations by the
Exchange (s) or SEBI may affect the ability of market maker to arbitrage resulting into
wider premium / discount to NAV for ETFs.
5. The performances of the strategies depend on the performance of the market and
the individual companies in which investment have been made under strategies
relative to industry specific and macro economic factors. The Portfolio Manager does
not assure or guarantee that Performance of Portfolio of the Investor shall better the
Performance of any Benchmark Index.
Page 18 of 36
6. The tax benefits described in this Disclosure Document are as available under the
present taxation laws and are available subject to conditions. The information given is
included for general purpose only and is based on advice received by the Portfolio
Manager regarding the law and practice in force in India and the investors should be
aware that the relevant fiscal rules or their interpretation may change. As is the case
with any investment, there can be no guarantee that the current tax position or the
proposed tax position prevailing at the time of an investment in the Portfolio will
endure indefinitely. In view of the individual nature of tax consequences, each
investor is advised to consult his/her own professional tax advisor regarding the
taxation aspects of his/ her portfolio investments.
7. Prospective investors should review/ study this Disclosure Document carefully and in
its entirety and shall not construe the contents hereof or regard the summaries
contained herein as advice relating to legal, taxation, or financial/investment matters.
Prospective investors are advised to consult their own professional advisor(s) as to
the legal, tax, financial or any other requirements or restrictions relating to the
subscription, gifting, acquisition, holding, disposal (sale or conversion into money) of
Portfolio and to the treatment of income(if any), capitalization, capital gains, any
distribution, and other tax consequences relevant to their portfolio, acquisition,
holding, capitalization, disposal (sale, transfer or conversion into money) of portfolio
within their jurisdiction of nationality, residence, incorporation, domicile etc. or
under the laws of any jurisdiction to which they or any managed funds to be used to
purchase/gift portfolio of securities are subject, and also to determine possible legal,
tax, financial or other consequences of subscribing/gifting, purchasing or holding
portfolio of securities before making an investment.
8. The debt investments and other fixed income securities may be subject to interest
rate risk, liquidity risk, default risk, credit risk and reinvestment risk. Liquidity in these
investments may be affected by trading volume, settlement period and transfer
procedures. Issuer of fixed income security may default or may be unable to make
timely payments of principal and interest. Net Asset Value of portfolio may be
affected due to perceived level of credit risk as well as actual event of default.
9. The corporate debt market is relatively illiquid vis-à-vis the government securities
market. There could therefore be difficulties in exiting from corporate bonds in times
of uncertainties. Further, liquidity may occur only in specific lot sizes. Liquidity in a
security can therefore suffer. Even though the Government securities market is more
liquid compared to that of other debt instruments, on occasions, there could be
difficulties in transacting in the market due to extreme volatility or unusual
constriction in market volumes or on occasions when an unusually large transaction
has to be put through. There can be no assurance that the requirements of the
securities market necessary to maintain the listing of specified debt security will
continue to be met or will remain unchanged. There may be limited/ no liquidity for a
debt security held in the client's portfolio at the time of liquidation of the portfolio for
reason of default/ delay in payment of amounts due on the said debt security by the
Issuer of the debt security
Page 19 of 36
10. The Portfolio Manager relies on the legal, financial and technical due diligence
undertaken by external professionals such as law firms, CA firms and valuation
agencies that may be appointed by the Trustee/ Issuer apart from conducting its own
due diligence which is undertaken by the in – house professionals relying on the
financials and other reports provided by the Issuer and / or other external
professionals.
11. Exposure to select Sector(s) carries the performance risk of the relevant sector, which
could outperform or underperform the market and/or various indices.
12. Some of the investments in niche sectors run the risk of volatility, high valuation,
obsolescence and low liquidity. Owing to the credit risk of debt that the strategy is
investing into, the preservation of capital is not guaranteed. In case of a default by
Issuer in any of the underlying securities, the trustees would endeavour to recover
the principal and the interest for the investors but , enforcing their legal rights by
litigating against defaulting Issuers is generally a slow and potentially expensive
process in India hence there is a risk of erosion of the principal invested in the
strategy by the investor. Additionally, the recovery process in case of a default may
take time to be implemented. Hence, at the level of each individual instrument, there
exists a risk of partial or complete capital erosion in case of a default by the Issuer. In
the event of a significant decline in property prices, the Trustee may not be able to
realise the value of the collateral or recover the principal and interest in the event of
a default by Issuer of debt security. In the event the Issuers of debt security default
on the repayment of interest and principal dues, the Trustee may not be able to
realize the full value of the collateral due to various reasons, including a possible
decline in the realizable value of the collateral, prolonged legal proceedings,
unavailability of a ready market and fraudulent actions by Issuers of debt security, or ,
the Trustee may not be able to foreclose on collateral at all. In India, foreclosure on
collateral may be subject to delays and administrative requirements that may result,
or be accompanied by, a decrease in the value of the collateral. Foreclosure on
collateral generally requires a written petition to an Indian court or tribunal. Although
special tribunals have been set up for expeditious recovery of debts due to banks, any
proceedings brought may be subject to delays and administrative requirements that
may result in, or be accompanied by, a decrease in the value of the collateral. A
decline in the value of the security could impair the Trustee’s ability to realize the
secured assets
13. The securities invested into the strategy will have credit quality of a wide range and
hence a varying amount of credit risk. Such securities may be rated or unrated. The
Issuer may be rated or unrated and if rated, the latest available credit rating will be
considered. The rating of the securities or the Issuer may be investment grade or
speculative grade Frequent rebalancing of portfolio may result in higher brokerage /
transaction cost. Also the allocation to different securities can vary from 0 to 100 %,
hence there can be a vast difference between the performance of the products and
returns generated by underlying securities.
14. Information available on some companies in which the Portfolio manager has made
investments may be limited.
Page 20 of 36
15. The performance of the strategies may be affected by change in Government Policies
including taxation, and certain unforeseen developments in political or general areas
at the national or international level. Also, the investments are subject to external
risks such as war, natural calamities and policy changes of local / international
markets which affect stock markets.
16. The performance of the strategies may also be affected and investor could lose
money over short periods due to fluctuation in NAV of Portfolio arising out of
fluctuations of interest rates, credit risk, political and geopolitical risk, currency risk,
foreign exchange risks, foreign investments, risks arising from changing business
dynamics, risk associated with investment in securities debt, risk due to movement in
Futures and options markets, changes in the general market conditions, forces
affecting the capital markets, closure of stock exchange due to circuit filter rules or
otherwise and risks associated with trading volumes, settlement periods, transfer
procedures, liquidity and settlement systems in equity and debt markets.
17. There is a possibility that loss may be sustained by the Portfolio as a result of the
failure of another party (usually referred as the “Counter party”) to comply with the
terms of the derivative contract.
18. Portfolio Manager, subject to authorization in writing by the client, may participate in
securities lending. Engaging in securities lending is subject to risks related to
fluctuations in collateral value/settlement/liquidity/default from counter party,
including corporate benefits accrued thereon. This may lead to the risk of Approved
Intermediary unable to deliver back the securities. Portfolio Manager cannot be held
liable for any loss arising out of operation of such strategies.
19. The portfolio manager may in the course of its activities, avail the services of persons
/ bodies who are not employees of the portfolio manager. The portfolio manager
would exercise due diligence when employing such persons, however there may be
losses incurred on account of any act or omission on part of such persons or bodies.
The portfolio manager disclaims liability for any loss in the portfolio on this account.
20. All portfolios under portfolio management are subject to change at anytime at the
discretion of the Portfolio Manager.
21. In the case of stock lending, risks relate to the defaults from counterparties with
regard to securities lent and the corporate benefits accruing thereon, inadequacy of
the collateral and settlement risks. The Portfolio Manager is not responsible or liable
for any loss resulting from the operations of the strategies/options.
22. Investments in the Market Linked Debentures (MLDs) are also subject to model risk.
The MLDs are created on the basis of complex mathematical models involving
multiple derivative exposures which may or may not be hedged and the actual
behavior of the securities selected for hedging may significantly differ from the
returns predicted by the mathematical models. Investments in preference capital
issues may not be backed by any collateral and would be subject to the Company Law
regulations or any other statutes that may govern their issuance from time to time.
23. Investing in any tranche of a Pass through certificate may not be backed by any
collateral.
Page 21 of 36
24. There may be limited/ No liquidity for a debt security held in the portfolio at time of
liquidation of the portfolio for reason of default/ delay in payment by the Issuer of
the debt security
25. Strategies may use derivative instrument like futures and options (index as well as
individual securities), warrants, convertible securities, swap agreements, etc. for the
purpose of hedging and/or portfolio balancing, as permitted under the
Regulations/guidelines. Strategies using such derivative products may be affected by
risks different from those associated with stock and bonds. Such derivative products
are highly leveraged instruments and their use requires a high degree of skill,
expertise and diligence. Small price movements in the underlying security may have a
large impact on the value of the derivatives and futures and options and may also
result in loss. Some of the risks relate to mis-pricing or the improper valuation of the
derivatives/futures and option and the inability to correlate the positions with the
underlying assets, rates and indices. The risk of loss associated with futures contracts
is potentially unlimited due to the low margin deposits required and the extremely
high degree of leverage involved in futures pricing. Also, the derivatives/future and
options market is nascent in India. The liquidity of the investments is guided by
trading volumes in the securities in which it invests. Although securities may be listed
on the Exchange(s), there can be no assurance that an active secondary market will
develop or be maintained. This may limit the Portfolio Manager’s ability to freely deal
with securities in the Portfolio and may lead to incurring of losses till the security is
finally sold. Different segments of the financial markets have different settlement
periods and such periods may be extended significantly due to unforeseen
circumstances. The inability of a Portfolio to make intended securities purchase due
to settlement problems could cause the portfolio to miss certain investment
opportunities. Similarly, the inability to sell securities held in the portfolio due to
absence of a well developed and liquid secondary market would at times result in
potential losses in the Portfolio, in case of a subsequent decline in the value of
securities held in the Portfolio.
26. The Portfolio Manager may invest in non-publicly offered debt securities and unlisted
securities. This may expose client’s portfolio to liquidity risks.
27. Securities, which are not listed on the Stock Exchanges, are inherently illiquid in
nature and carry a larger amount of liquidity risk, in comparison to securities that are
listed on the Exchanges or offer other exit options to the investor. The Portfolio
Manager may, at its discretion, invest in lower rated/unrated securities that offer
attractive yield, which may increase the risk of the Portfolio. Such investments shall
be subject to the scope of investments laid down in the executed agreement.
28. The Portfolio Manager may seek to create value by investing in stocks that trade
below the estimated fair value of the Company, which shall be judged by various
quantitative valuation parameters. But due to various reasons, it may so happen that
such stocks continue to languish and are not able to attain the price discovery.
Accordingly, this may have material adverse impact on the performance of the
portfolio.
Page 22 of 36
After accepting the corpus for management, the Portfolio Manager may not get an
opportunity to deploy the same or there may be delay in deployment. In such
situation the clients may suffer opportunity loss.
i. Category of clients as on August 31, 2019:
Category of Clients as on August 31,2019 :
Category of Clients No of
Clients
Funds
Managed
Remarks
(Rs. In Crs)
Associate/ Group Companies
As on August 31,2019 0 0 Discretionary
As on March 31, 2019 0 0
As on March 31, 2018 0 0 Discretionary
Others
As on August 31, 2019 1800 733.99 Discretionary
As on March 31, 2019 1553 628.27 Discretionary
As on March 31, 2018 990 355.84 Discretionary
Total
As on August 31, 2019 1800 733.99 Discretionary
As on March 31, 2019 1553 628.27 Discretionary
As on March 31, 2018 990 355.84 Discretionary
ii. Complete disclosure in respect of transactions with related parties as per the standards specified by the Institute of Chartered Accountants of India (as on 31st March 2019)
S
r.
N
o
Name of the related
party Nature of Transaction
Amount
2018-19 2017-18
1
Karvy Stock Broking
Limited
Shared Services of
Expenses/ (revenue),
net
118,23,261
110,16,757
Fee income /
(expenses)
(1695,00,000) (1775,00,000)
Section 7: CLIENT REPRESENTATION
Page 23 of 36
2
Mr. Kedar Deshpande
Managerial
Remuneration paid
136,21,536 109,37,385
Sale of securities (34,60,144) -
3 Ms.Shirisha Yallam Remuneration paid - 367,981
5 Mrs. T N Srividya, wife
of Kedar Deshpande
Sale of Securities (30,22,355)
Section 8: FINANCIAL PERFORMANCE OF PORTFOLIO MANAGER (BASED ON AUDITED
FINANCIAL STATEMENTS)
As at As at As at
31-Mar-19 31-Mar-18 31-Mar-17
Rs in Lakhs Rs in Lakhs Rs in Lakhs
SOURCES OF FUNDS
Shareholders' Funds 1839.71 1571.84 1,384.44
Share Application Money - - -
Loan Funds 4010.70 4,805.24 3,455.06
Deferred Tax Liability - - -
Total 5850.41 6,377.08 4,839.50
APPLICATION OF FUNDS
Net Fixed Assets 18.12 17.19 23.34
Stock Exchange Membership
Cards
- - -
Investments 360.00 360.00 360.00
Current Assets (incl deposit) 6416.92 6629.45 5,189.78
Less: Current Liabilities and
Provisions (including long term
provisions and excluding
external borrowings)
-952.67 -641.89 -742.60
Deferred Tax Asset 8.04 12.33 8.98
Total 5850.41 6377.08 4,839.50
Summarized Financial Statement - Profit and Loss Account
For the year
ended
For the year
ended
For the year
ended
31-Mar-19 31-Mar-18 31-Mar-17
Page 24 of 36
Rs. In Lakhs Rs. In Lakhs Rs. In Lakhs
Total Income 4190.81 3,692.45 1,970.61
Total Expenses 3784.02 3,425.86 1,757.54
Profit before Depreciation and
Tax
406.79 266.59 213.07
Depreciation/Amortisation 5.83 8.10 12.44
Profit before Tax 400.96 258.49 200.63
Provision for Tax 133.09 71.09 68.61
Profit After Tax 267.87 187.40 132.02
Find below the Performance of the Portfolio Manager calculated using weighted average
Method for the three financial years 2016-2017, 2017-18, 2018-19 and the period April
2019 upto July 2019
Returns%
Period
01.04.2019-
31.08.2019
01.04.2018-
31.03.2019
01.04.2017-
31.03.2018
01.04.2016
-
31.03.2017
Discretionary PMS- Resident
Portfolio
Performan
ce (%)
Demeter
Strategy
11.27 11.87 12.05 13.70
Performan
ce (%)
S&P BSE
India
Corporate
Bond
Index#
11.70 7.81 7.28 8.98
Benchmark Five year 6.85 6.85 6.25
Section 9: PORTFOLIO MANAGEMENT PERFORMANCE OF PORTFOLIO MANAGER FOR
THE LAST THREE YEARS. IN CASE OF DISCRETIONARY PORTFOLIO MANAGER, DISCLOSURE
OF PERFORMANCE INDICATORS CALCULATED USING WEIGHTED AVERAGE METHOD IN
TERMS OF REGULATION 14(2)(b)(iv) OF THE SEBI (PORTFOLIO MANAGERS) REGULATIONS,
1993
Page 25 of 36
Performan
ce (%)
Fixed
Deposit
offered
by State
Bank of
India
Portfolio
Performan
ce (%)
Excel
Strategy
10.35 10.06 10.13 8.16$
Benchmark
Performan
ce (%)
S&P BSE
India
Bond
Index
15.52 8.49 5.41 5.37$
Benchmark
Performan
ce (%)
Five year
Fixed
Deposit
offered
by State
Bank of
India
6.85 6.85 6.50$
Portfolio
Performan
ce (%)
Aegis
Strategy -
Debt
9.10 7.06 NA NA
Benchmark
Performan
ce (%)
S&P BSE
India
Bond
Index
15.52 15.77 NA NA
Benchmark
Performan
ce (%)
Five year
Fixed
Deposit
offered
by State
Bank of
India
6.85 6.85 NA NA
Benchmark
Performan
ce (%)
Aegis
Strategy -
MLD
-36.03 27.54 NA NA
Benchmark
Performan
ce (%)
BSE 500 -17.74%
24.69 NA NA
++ Investment in Aegis strategy may have equity component in the form of market linked
debentures [MLD] and a debt component, depending on the choice of the investor. Initial
Investment in MLD was done on January 8 2019. $ The first client in the Excel portfolio was
Page 26 of 36
activated on November 8, 2016. The portfolio and benchmark performance is therefore
shown for the period 8th November 2016 to 31st March 2017.
**The first client in the Demeter portfolio was activated on July 1, 2014. Hence, the
performance has been provided from July 1, 2014 instead of April 1, 2014.
#Disclaimer: For Demeter Strategy - Earlier NSE Gsec 1-3 year Sub-maturity Index was used
as Benchmark. Due to the discontinuation of its publication by NSE beginning 1st April 2015,
the benchmark to “S&P BSE India Corporate Bond Index” is now being used.
Presently there are no Non Resident Indian clients in the Discretionary Strategies offered by
the Portfolio Manager and also there are no live Non Discretionary strategies. Therefore
performance figures for both these heads are “NIL”.
**** The rate of 5 year Fixed Deposit offered by State Bank of India is being used as a
benchmark from April 2017
Section 10: NATURE OF EXPENSES
The following are the general costs and expenses to be borne by the Client availing the
services by the Portfolio Manager. However, the exact nature of expenses relating to each of
the following services is provided in the annexure to this Risk Disclosure Document and in
the Schedule of Charges signed by the client in respect of each of the services provided.
(i) Portfolio Management and Advisory Fees
This fee relates to the portfolio management services offered by Portfolio Manager
(including advisory services) to the clients. The fee may be a Fixed Charge on the quantum of
the funds being managed (or) charges linked to portfolio return (or) combination of both. (ii)
Premature Redemption Charges/ Exit fees
If the redemption is done prematurely at the option of the client, the Portfolio Manager shall
levy the Premature Redemption Charges.
(iii) Depository Participant fee
The charges relating to opening and operation of demat accounts, custody and transfer
charges for shares, bonds and units, dematerialization and rematerialization, pledge and
removal of pledge, etc. will be as per the actual charged by the Depository Participant.
(iv) Custodian fee
The charges relating to custodian activities will be as per the actual charged by the
Custodian. For details kindly refer the annexure to this Risk Disclosure Document.
(v) Registrar and transfer agent fee
Page 27 of 36
Charges payable to the Registrar and Share Transfer Agents in connection with effecting
transfer of securities and bonds, units, etc. including stamp charges, cost of affidavits, notary
charges, postage/courier charges and other related charges will be recovered on actual. For
details kindly refer the annexure to this Risk Disclosure Document.
(vi) Placement fee :
A Placement fee will be charged as a percentage of corpus over and above the fixed
management fee and performance fee. The placement fee shall also be charged each time
corpus is infused/ brought in by the client during the lifetime of the portfolio investment.
The placement fee shall be computed as a percentage of the initial corpus brought in by the
client and if subsequent to account opening, additional corpus brought in by such client
then it shall be computed as a percentage of the additional corpus brought in. The
Placement fee shall be deducted upfront from the Client’s portfolio immediately on receiving
the corpus from the client.
(vii) Brokerage and transaction cost - The Brokerage and other charges like Goods and
Services Tax and related charges such as, Stamp duty, Security Transaction Tax, SEBI Fees,
Bank charges, Turnover tax, and other charges (if any), as per the rates existing from time to
time, will be charged on actual. Certain investments by the Portfolio Manager may require
services of Stock Broker(s) and in such cases, The investment by Portfolio Manager will be
done through Karvy Stock Broking Limited {Stock Broker}, Edelweiss Securities, Reliance
Capital Securities, HDFC securities, IDC securities, Centrum Securities, Emkay securities or
through services of only SEBI registered Stock Broker(s) as may be empanelled by the
Portfolio manager would be used as per the rates negotiated between Portfolio Manager
and such stock broker. The charges relating to brokerage as per the related party
transactions charged by Karvy Capital Limited or through any SEBI Registered stock broker
will be recovered on actual by the Portfolio Manager
(viii) Securities Lending Charges
If utilized, the charges pertaining to lending of securities and costs associated with transfer
of securities connected with lending transfer operations, Depository Participant Charges,
Share Transfer Agent Charges, etc. would be recovered on actual.
(viii) Certification Charges or Professional Charges
Any charges payable for outsourced professional services like accounting, taxation, auditing,
and any legal services, notarizations, etc., incurred on behalf of the Client by the Portfolio
Manager, will be charged from the client on actual.
(ix) Incidental Expenses
Charges in connection with day to day operations like courier charges incurred in providing
physical reports relating to client’s portfolio / welcome letter / other communication to
clients , stamp duty, Goods and Services Tax , postal, telegraphic expenses, opening and
operation of bank and demat accounts or any other out of pocket expenses incurred by the
Portfolio Manager, on behalf of the client, would be recovered from the client.
Page 28 of 36
Section 11: TAXATION
General - It may be noted that the information given hereinafter is only for general
information purposes and is based on the advice received by the Portfolio Manager
regarding the law and practice currently in force in India and the Investors should be aware
that the relevant fiscal rules or their interpretation may change or it may not be acceptable
to the tax authorities. As is the case with any interpretation of any law, there can be no
assurance that the tax position or the proposed tax position prevailing at the time of an
investment in the strategy/plan/option will be accepted by the tax authorities or will
continue to be accepted by them indefinitely.
Further statements with regard to tax benefits mentioned herein below are mere
expressions of opinion and are not representations of the Portfolio Manager to induce any
investor to invest whether directly from the Portfolio Manager or indirectly from any other
persons by the secondary market operations. In view of the above, and since the individual
nature of tax consequences may differ in each case on its merits and facts, each Investor is
advised to consult his / her or its own professional tax advisor with respect to the specific tax
implications arising out of its participation in the PMS strategy/plan/option, as an investor.
In view of the above, it is advised that the investors appropriately consult their investment /
tax advisors in this regard.
Portfolio Manager cannot be held responsible for assisting or completing the fulfillment of
the client’s tax obligations.
Income arising from purchase and sale of securities under Portfolio Management Services
can give rise to business income or capital gains in the hands of the Client. The issue of
characterization of income is relevant as the tax computation and rates differ in either of the
two situations. The said issue is essentially a question of fact and depends on whether the
shares are held as business trading assets or on capital account. Based on judicial decisions,
the following factors need to be considered while determining the nature of assets as above:
a. Motive for the purchase of securities
b. Frequency of transactions
c. Length of period of holding of the securities
d. Treatment of the securities and profit or loss on their sale in the accounts of the assessee
and disclosure in notes thereto
e. Source of funds out of which the securities were acquired - borrowed or own
f. Existence of an objects clause permitting trading in securities – relevant only in the case of
corporate.
g. Circumstances responsible for the sale of securities
Page 29 of 36
h. Acquisition of the securities -from primary market or secondary market Infrastructure and
set - up employed for undertaking the securities transactions by the client
Any single factor discussed above in isolation cannot be conclusive to determine the exact
nature of the shares. All factors and principles need to be construed harmoniously.
Investors may refer to CBDT instruction no. 1827 dated August 31, 1989 read with CBDT
Circular no. 4 dated June 15, 2007 for further guidance on the matter.
Tax implications under the Income Tax Act, 1961 ("IT Act") arise in the hands of the Clients
(resident as well as the non-resident) under both the scenarios, viz:
a. Securities in the Portfolio held as business asset; and
b. Securities in the Portfolio held on capital account.
Additionally, non-residents (including Flls/FPIs) are governed by the applicable Double Tax
Avoidance Agreement ("DTAA), which lndia has entered into with the country of residence of
the non-resident, if that is more beneficial. The same would have to be considered on a case-
to-case basis depending upon the applicable DTAA. Ordinarily, capital gains and interest
income are taxable in lndia in the manner and at the rates prescribed under the relevant
DTAA or the relevant rates applicable in India, whichever is beneficial to the assessee.
Further, business income is normally not taxable in lndia.
Tax Deducted at Source
Presently, tax is withheld at source for non-residents. If any tax is required to be withheld on
account of any future legislation, Portfolio Manager shall be obliged to act in accordance
with the regulatory requirements in this regard.
Advance Tax installment obligations
It shall be the client’s responsibility to meet the advance tax obligation installments payable
on the due dates under the Income Tax Act, 1961.
Tax Implications - Investment in Shares or units of Equity Oriented Mutual Fund
Dividend
Dividend received by shareholders is exempt from tax- section 10 (34) of IT Act.
Profits from sale / transfer of shares (or units of equity oriented mutual fund)
• If considered as capital gains: (capital gains = sale consideration – cost of acquisition–
expenses incurred in connection with such transfer)
Capital
Gains
Long term Capital Gains (LTCG) Short term Capital Gains (STCG)
Page 30 of 36
Period
of
holding
Rate Period
of
holding
Rate
Listed
Shares
(Where STT
is paid)
More
than 1
year
Earlier Exempt u/s *.
10(38)
1 year
or less
15%
Listed
Shares
(Where STT
is not paid)
More
than 1
year
20% with indexation
or 10% without
indexation (whichever
is more beneficial to
clients)
1 year
or less
maximum marginal rate of
tax or at slab rates, as the
case may be
Unlisted
Shares
More
than 1
year
20% with indexation 1 year
or less
maximum marginal rate of
tax or at slab rates, as the
case may be
Long Term capital Gains
Any investments (equity share in a company or a unit of an equity oriented fund) held for 12
months or more than 12 months would be classified as Long Term Capital Assets. Gains
arising out of such assets are called Long Term Capital Gains. These were exempt from
capital gains tax, provided the shares are sold on a recognized stock exchanges in India and
such transactions are subjected to Securities Transaction Tax (‘STT’) in accordance with
Chapter VII of the Finance (No.2) Act, 2004 and/or Income Tax Act, 1961. With effect from 1st
April 2017, in the case of equity shares, in terms of proviso to Section 10(38) of the Income
Tax Act, 1961 inserted vide Finance Act, 2017, equity shares acquired on or after 1st October’
2004 (other than the acquisition notified by the Central Government), exemption shall be
admissible only if STT was also paid at the time of acquisition of such equity shares. Finance
Bill, 2018 has withdrawn the above exemption and vide Section 112A of the Income Tax Act,
1961, tax on such long term capital gains exceeding one lakh rupees is leviable at the rate of
10%. Clients are requested to check with their Tax Advisor on the applicable rates of tax,
STT, surcharge and health and educational cess at any given point of time.
• If considered as business income - net income taxable at maximum marginal rate of tax or
at slab rates, as the case may be.
Note: surcharge (if applicable) will be charged additionally. Clients are requested to contact
their tax consultant to determine their exact tax status.
Tax Implications - Investment in Derivative instruments
Investment in derivative instruments is considered as business income & is taxable at
maximum marginal rate of tax or at slab rates, as the case may be.
Page 31 of 36
Note: surcharge (if applicable) will be charged additionally. Clients are requested to contact
their tax consultant to determine their exact tax status.
Tax Implications - Investment in Debentures or bonds
Interest income
Interest received by debenture holder is taxable under the head “Income from other
sources” at slab rates or at maximum marginal rate of tax as the case may be
Profits from sale / transfer of Debentures (or bonds)
• If considered as capital gains: (capital gains = sale consideration – cost of acquisition–
expenses incurred in connection with such transfer)
Capital
Gains
Long term Capital Gains (LTCG) Short term Capital Gains (STCG)
Period of
holding
Rate Period
of
holding
Rate
Listed
Debenture
or bonds
More
than 1
year
20% with indexation
or 10% without
indexation (whichever
is more beneficial to
clients)
1 year
or less
maximum marginal rate of
tax or at slab rates, as the
case may be
Unlisted
Debenture
or bonds
More
than 3
years
20% with indexation 3 years
or less
maximum marginal rate of
tax or at slab rates, as the
case may be
• If considered as business income - net income taxable at maximum marginal rate of tax or
at slab rates, as the case may be.
Note: goods and services tax and related charges (if applicable) will be charged additionally.
Clients are requested to contact their tax consultant to determine their exact tax status.
Tax Implications - Investment in Debt Oriented Mutual Fund
Dividend
Dividend received by shareholders is exempt from tax- section 10 (34) of IT Act.
Profits from sale / transfer of units
Page 32 of 36
• If considered as capital gains: (capital gains = sale consideration – cost of acquisition–
expenses incurred in connection with such transfer)
Capital Gains Long term Capital Gains (LTCG) Short term Capital Gains (STCG)
Period of
holding
Rate Period of
holding
Rate
Debt MF units More than 3
years
20% with
indexation
3 years or less maximum
marginal rate of
tax or at slab
rates, as the
case may be
• If considered as business income - net income taxable at maximum marginal rate of tax or
at slab rates, as the case may be.
Note: goods and services tax and related charges (if applicable) will be charged additionally.
Clients are requested to contact their tax consultant to determine their exact tax status.
Capital loss
Losses under the head 'capital gains' cannot be set off against income under any other head.
Further, within the head 'capital gains', long-term capital losses cannot be adjusted against
short-term capital gains. However, short-term capital losses can be adjusted against any
capital gains. Unabsorbed long-term capital loss can be carried forward and set off against
the long-term capital gains arising in subsequent eight assessment years. Unabsorbed short-
term capital loss can be carried forward and set off against the income under the head
capital gains in subsequent eight assessment years
Securities Transaction Tax
Securities Transaction Tax is the tax leviable on the taxable securities transactions i.e.
transaction of:
(a) Purchase or sale of an equity share of a listed companies (whether delivery based or non-
delivery based) or a derivative or a unit of an equity oriented fund, entered into in a
recognized stock exchange; or
(b) Sale of a Unit of an equity oriented fund to the Unit Trust of India or Mutual Fund.
The income arising from the securities transactions shall be taxed at applicable rates under
the Income Tax Act, 1961 if Securities Transaction Tax is not applicable in respect of such
transactions.
Page 33 of 36
Section 12: ACCOUNTING POLICIES
The following is the accounting policy followed by the Portfolio Manager while accounting
for the portfolio investments of the clients.
Investment in equities will be valued on the closing price of that equity at NSE. In case of any
investments done in any equity listed on BSE only, the same will be valued based on the
closing price of that equity in BSE. In case the prices are not available from NSE or BSE Stock
exchange, then any other stock exchange shall be considered.
These shall include the Equity shares including Indian Depository Receipts and other
instruments, as the case may be. In case a share is not traded on a valuation date, latest
closing price of either principal / secondary or any other stock exchange would be used.
Equity/preference shares which are not listed on stock exchanges are included in portfolio
valuation at fair/cost value. In case an Equity share is suspended/non-traded/ awaiting
Corporate Actions, then the valuation of such equity share shall be done on the basis of good
faith relying upon prevailing practices elsewhere.
In case of the warrants been traded separately they would be valued as an equity share and
valued accordingly. In case of the non traded warrants, the warrants will be valued at the
value of the share which would be obtained on exercise of the warrant less the amount
payable on exercise of the warrant. On exercise of warrant, the warrants would be
transferred to the normal equity and valued accordingly.
For valuation of the derivatives contract, the open positions, as on the date of valuation,
shall be valued as per the last traded prices available from the relevant stock exchange, and
will be valued on the mark to market method.
In case of Mutual Fund, investments in mutual funds shall be valued at the latest available
NAV of the respective scheme. Investment in Exchange listed (ETF) shall be valued at the
closing price on the relevant exchange.
If on a valuation date Exchange Traded Funds (ETF) is not traded either on the primary or
secondary stock exchange, ETF shall be valued at the latest available NAVs of the ETF
Scheme.
Investment in debt instruments will be valued at the market value of the debt instrument as
on cut off date (or) the latest available price on the relevant exchange or the most recent
NAV will be reckoned. For illiquid securities, the valuation may be provided by the issuer on a
periodic basis and/or as required by the portfolio manager.
Realised gains/losses will be calculated on the basis of First in First out (FIFO) basis.
Transaction date will be the trade date and not the settlement or auction date.
Page 34 of 36
For derivatives transactions (if any), the unrealized gains/losses on open position will be
calculated on the mark to market method.
Unrealized gain/losses means the profit/loss not yet booked and the same will be the
difference of the current market price or NAV minus the actual purchase price (or) the
historical cost of the securities.
All income will be accounted on accrual or receipt basis, whichever is earlier. All expenses
will be accounted on due or payment basis, whichever is earlier.
Purchase and sale transactions are accounted for on contract date basis. Cost of purchase
and sale includes consideration for scrip and brokerage but excludes Securities Transaction
Tax, Service Tax & other charges paid on purchase/sale of securities. Other expenses like
Custodian charges (Safe keeping charges, Transaction charges, Fund Accounting charges, Out
of Pocket expenses) shall be accounted for as & when debited by the Custodian.
Any corporate benefits like dividend on shares, mutual fund units, interest on debt
instruments, stock lending fees etc. shall be accounted on accrual basis except interim
dividend which would be accounted on receipt basis.
Bonus shares are recorded on the ex-benefit date (ex-date). Dividend income is recorded on
the ex-dividend date (ex-date)
Tax deducted at source on interest on instruments such as Fixed Deposits etc. /Dividend is
considered as withdrawal of corpus and debited accordingly.
Portfolio Manager and the Client, on case to case basis, can mutually agree to any specific
norms or methodology for valuation of investment and/or accounting. The Client may
contact the Portfolio Manager for the purpose of clarifying or elaborating on any of the
above.
Section 13: INVESTOR RELATIONS OFFICER - IRO
The below mentioned employee has been nominated as the Investor Relations Officer by
Portfolio Manager who will attend to the investor queries and complaints:
Mr Santosh Natrajan
Karvy Capital Limited
702, Hallmark Business Plaza,
Sant Dnyaneshwar Marg, Bandra (E),
Mumbai 400 051.
Tel No. (B) 022-33055000 Tel No. (D) 02261491674
Fax No. 022-61491577 Email ID – [email protected]
Page 35 of 36
Section 14: GRIEVANCE REDRESSAL
The Portfolio Manager has dedicated an email id
[email protected] for all the investors to lodge their grievance. Apart from this,
the portfolio clients can get in touch with the IRO in person, over phone or through written
communication.
Portfolio Manager will ensure that the above IRO attends to all investor grievance/service
issues with promptness and Portfolio Manager will ensure that this IRO is vested with
necessary authority, independence and the means to handle investor grievance effectively
and immediately, within reasonable period of time.
If not satisfied with our response, you may approach SEBI with your grievance through SEBI’s
web based centralized grievance redressal system (SCORES) on http://scores.gov.in or may
also write to SEBI in physical form.
Section 15: DISPUTE SETTLEMENT MECHANISM
All disputes, differences, claims and questions, whatsoever, which shall arise either during
the subsistence of the agreement with the Client or afterwards, with regard to the terms
thereof or any clause or thing contained therein or otherwise in any way relating to or arising
there from or the interpretation of any provisions therein shall be, at the first instance,
settled by mutual discussions, failing which the same shall be referred settled in accordance
with the provisions of The Arbitration and Conciliation Act, 1996 in the form existing at the
point of time.
Such arbitration proceedings will be held at Mumbai or any other place where the Portfolio
Manager thinks fit and will be conducted in English.
The agreement with the Client shall be governed by, construed and enforced in accordance
with the laws of India.
Any action or suit involving the agreement with a Client or the performance of the
agreement by either party of their obligations will be conducted exclusively in Courts located
within the city of Mumbai in the State of Maharashtra, India.
Section 16: GENERAL
The Portfolio Manager and the client can mutually agree to be bound by specified terms
through a written two-way agreement between themselves in addition to the Portfolio
Management Services Agreement for Portfolio Management Services.
Page 1 of 46
ANNEXURE A
A. Discretionary Portfolio Management Services
1. Demeter Portfolio
Introduction Demeter Portfolio is designed for investors seeking income and capital appreciation from
their asset allocation to debt, preference capital, commercial papers, tax free bonds and pass
through certificates. The Portfolio would be Ideal for investors looking for allocation in a
fixed income portfolio or those with current exposure in high-yielding securities looking for
diversification. Demeter Portfolio has been introduced since July 1, 2014.
Investment Objective
The investment objective is to diversify risk across sectors and instruments with the sole
intention of generating cash flows and/or capital gains through interest, preference dividend
or trading. It will help diversify the client’s investment across many papers spread across
different sectors and varied Industries within sectors where by reducing the concentration
risk. Strategy is to generate capital appreciation and income through interest, preference
dividend and trading (both in the short term and over the long term) of securities in the
secondary markets. The portfolio will primarily consist of debt securities, preference capital,
commercial paper, tax free bonds and pass through certificates.
Investment Horizon and Risk Return Profile
Demeter portfolio is recommended for investors seeking to hold a debt portfolio with
moderate to high risk appetite expecting a moderate to high yield/ return over a long term
horizon. Investment in Demeter is recommended for a period of more than 3 years.
Below is a pictoral representation of the Demeter strategy risk.
RISK
Strategy
The Investment Philosophy of Demeter strategy is that investments are sector agnostic with
a focus on growing companies. The base case strategy is to buy and hold the moderate to
high yield debt instruments however, sale at a premium before maturity will also be
explored subject to opportunities. Opportunistically, the portfolio will also target extracting
returns for market making for moderate to high yield debt instruments buying and selling
Low Moderate High
Page 2 of 46
over a short duration. The criteria for selecting securities to invest in the Demeter Portfolio
would be that the Issuer should be preferably backed by institutional Equity Investors,
Keyman risk should be minimum and Issuers capability to repay the debt on the basis of
cash flow generation cited by the Issuer. In cases of Non banking finance companies and
Micro Finance Institutions, the Asset liability management would be ascertained rather than
cash flow generation for debt repayment. The Demeter portfolio will be actively managed.
The Demeter strategy will undertake to an extent as deemed fit by the Portfolio Manager,
opportunistic buying and selling of debt securities or any other instrument in the portfolio to
improve the returns earned by investors. However, in this endeavour, the portfolio manager
may on some occasions not receive suitable exit for the securities thus bought in the
portfolio. In such cases, the portfolio manager may either decide to hold such security to
maturity or to exit it at a loss when compared with the purchase price. For investors entering
the strategy partially or wholly through their current holdings of debt instruments, the
portfolio manager will seek to diversify these holdings to reduce concentration of credit risk.
As a possible implication, the yield in Internal Rate of Return [IIR] terms and income paid out
through regular coupons of the portfolio thus achieved may be different (and lower) from
that of their current holdings.
Asset Allocation
The portfolio will be predominantly invested in debt securities, preference capital, and pass
through certificates using the securities defined below though. The debt component of
Demeter portfolio may comprise of moderate to high yield debt, which can be secured or
unsecured, convertible or non-convertible securities which may be rated or unrated by credit
rating agencies. The portfolio manager may decide to hold cash/liquid funds or any other
debt mutual fund The portfolio achieves significant diversification across real estate,
mezzanine debt and securitized debt and also amongst various borrowers within these
domains at a ticket size of only Rs. 25 lakhs. The diversification will also be achieved through
spread of investments in different Sectors and various industries within sectors. Some of the
products to which the Demeter portfolio may subscribe are as described below:
Structured Mezzanine Debt–These would include Non Convertible Debentures issued
by, high growth companies with good ROCE (Return on Capital Employed) whose end
use may be alternative to venture capital funding, equity like end use, however with
regular servicing of coupon.
Securitized Debt –Pass through certificate (PTC) issued on the basis of pool of
underlying loans to SMEs, microfinance, vehicle loans etc.
Repurchase Agreements (Repo) – Repo (Repurchase Option) is a formal agreement
between two counterparties where one party sells securities to another party with
the explicit intention of buying back the securities at a later date. The Portfolio
Manager shall enter into such Repo Agreements with counterparties holding
government bonds where the seller of the government bonds agrees to buy back the
government bonds from the Portfolio Manager at a predetermined time and rate.
Page 3 of 46
Benchmark and Targeted Yield
Both S&P BSE India Corporate Bond Index and Rate of Interest of 5 year Fixed Deposit issued
by State Bank are used for Benchmarking the performance of Demeter portfolio.Demeter
Portfolio will aim to generate 8-10% more returns than rate of interest of 5 year Fixed
Deposit issued by State Bank of India.
Performance of Strategy
Performance of the Demeter Portfolio is measured at six monthly intervals and is shown vis a
vis the benchmark in the Risk Disclosure Document filed by the Portfolio Manager with SEBI
every six months or upon occurring of any material change. The Portfolio Manager shall use
measurement tools like Modified duration, Macaulay’s duration to measure price sensitivity
of the investments and to determine the time required to recover the present value of all
cash flows from the portfolio. Prior to opting to invest in the Demeter Portfolio, prospective
clients shall be shown returns till date of a model portfolio comprising the securities in which
the Demeter portfolio is invested. The increase in portfolio value between consecutive time
periods indicates income (interest/dividend) accrual. The subsequent decline occurs due to a
payout to the investor from the issuer as well as a deduction of management fees. This
process may continue till the investor exits the strategy. Clients can also view the
performance details in the Risk Disclosure Document uploaded on www.karvycapital .com.
Securities
Investments would be made in all types of debt securities, preference capital, Commercial
paper, Tax free bonds , perpetual bonds and other bonds, pass through certificates(which
may or may not be in dematerialized form) including but not limited to debentures,
preference capital (perpetual, optionally convertible or compulsorily redeemable), pass
through certificates comprising of any tranche of any seniority including the equity tranche
of any maturity (fixed, floating, Variable Coupon, and equity index /stocks /stocks basket
linked, real estate backed) which may be, Securitised Debt, Pass Through Certificates, Bonds,
Government securities issued or guaranteed by Central or State Government, corporate
debt of both public and private sector undertakings, securities issued by banks (both public
and private sector) and development financial institutions, fixed deposits, commercial
papers, certificate of deposit, trade bills, treasury bills and other money market instruments,
units of mutual funds, Exchange Traded Funds, units of SEBI registered Alternative
Investment Funds, floating rate debt securities and fixed income derivatives like interest rate
swaps, forward rate agreements and the like as may be permitted by the Act, Rules and/or
Regulations, guidelines and notifications in force from time to time. These securities may be
acquired through primary market issuances such as subscription to Initial public offers,
Follow on Public offers, Rights issues and private placements of securities, secondary market
purchases, auctions held by the Reserve Bank of India, open market sales of securities
conducted by Reserve Bank of India and the like.
The Portfolio may also use derivative instruments – Futures and Options – for hedging and
rebalancing of the portfolio. Derivative Instruments shall, however, not be used in case of
NRI investors.
The Portfolio manager may buy securities which have equity like nomenclature while the
features in terms of returns and convertibility will be like debt. These instruments would
Page 4 of 46
include but not be limited to securities like convertible preference shares, non convertible
compulsorily redeemable preference shares, perpetual preference shares and some
optionally convertible debentures.
Investment in listed/publicly traded securities will be valued on the day end’s NAV/closing
price. Investment in other debt instruments will be valued as per valuation provided by the
Issuer.
With respect to the debentures being bought by Karvy Capital Limited as Discretionary
Portfolio Manager for its clients in Demeter strategy, clients may please note the following:
Karvy Capital Limited as an NBFC / any Karvy Group entity may assist the Issuer to structure
the debenture issuance for the purpose of raising capital through the private placement
route. Karvy Capital Limited as an NBFC / any Karvy Group entity may actively associate with
the Issuer for structuring of the security in relation to the debentures, preparation of the
term sheets and related documents for sharing product details with prospective clients and
for appointment of key agents such as trustee, escrow agent, legal counsel and the like.
Karvy Capital Limited may also be the “Debenture Holder Representative and Calculating
Agent” thereby having the power to approve amongst other things - dilution of promoter
stake in the Issuer company, disbursal of amounts from escrow account to the Issuer , any
change in the security cover for the debentures and without whose consent the above
cannot occur. As a Calculating Agent, Karvy Capital Limited calculates the amount of interest
and final redemption amount due to the debenture holders.
For this, Karvy Capital Limited as an NBFC / any Karvy Group entity may receive a payment
from the Issuer which could be structured as advisory fee, discount on such debentures to
Karvy Capital Limited[NBFC] or the Karvy group entity at the time of first purchase or a
combination of the two.
Karvy Capital Limited as an NBFC / any Karvy Group entity may also be the first subscriber to
such privately placed debentures. Therefore Karvy Capital as discretionary portfolio manager
may buy the debentures from Karvy Capital limited {NBFC} or any Karvy Group entity [first
subscriber]. Such down selling by Karvy Capital Limited {NBFC} to Karvy Capital Limited
{Portfolio manager} / any Karvy Group entity may be done at a premium.
Alongside, Karvy Capital Limited as an NBFC shall continue to undertake distribution activity
with regard to the said debentures i.e to downsell the debentures to prospective clients
other than the PMS customers.
In addition to downselling by Karvy Capital Limited {NBFC} as mentioned above, Karvy Capital
Limited (Portfolio Manager) may purchase debentures for clients of the Demeter strategy
through the below routes as well:
a. Primary issuance of debentures by an Issuer subscription to the debentures
by Karvy Capital PMS.
b. Offer for secondary sale of debentures by third party debenture holder(s)
Purchase of debentures by Karvy Capital PMS.
Page 5 of 46
The Portfolio Manager may, when offering Discretionary Portfolio management services , at
its discretion, purchase securities from client()s of one discretionary portfolio management
strategy for client(s) of another discretionary portfolio management strategy or from third
party at par value. Additionally,
a. The debentures which the Portfolio Manager may invest in for the client
may or may not have some form of collateral backing them. Such
collateral may include one or more amongst the following – real estate
assets, shares of the issuing company, shares of other companies related
to the issuing company, other listed or unlisted shares, escrow of
cashflows, brand, patents, fixed assets of the company etc. However,
depending on the specific collateral used and as per the interpretation of
the Companies Act, 2013 the debentures may be deemed to be secured
or unsecured in nature.
b. Investment in Instruments that are listed may not be backed by any
collateral.
c. Investments in preference capital issues may not be backed by any
collateral and would be subject to the Company Law regulations or any
other statutes that may govern their issuance from time to time.
d. Investing in any tranche of a Pass through certificate may not be backed
by any collateral.
e. Owing to the credit risk of debt that the strategy is investing into, the
preservation of capital is not guaranteed. In case of a default by issuer in
any of the underlying securities, the trustees would endeavour to
recover the principal and the interest for the investors but there is a risk
of erosion of the principal invested in the strategy by the investor.
Additionally, the recovery process in case of a default may take time to
be implemented. Hence, at the level of each individual instrument, there
exists a risk of partial or complete capital erosion in case of a default by
the issuer.
f. The securities invested into by the Demeter strategy will have credit
quality of a wide range and hence a varying amount of credit risk. Such
securities may be rated or unrated. The issuing company may be rated or
unrated and if rated, the latest available credit rating will be considered.
The rating of the securities or the issuing company may be investment
grade or speculative grade.
g. The Portfolio Manager will endeavour to follow stringent due diligence
process while selecting the securities in which to invest in. The diligence
process will typically consist of Management Analysis, Financial
Anaylysis, Product Analysis, Industry Analysis, Buyer/supplier analysis,
cash flow analysis and company/product life cycle analysis. The portfolio
manager may use services of reputed external/third party agencies for
Valuation, Financial and Legal Diligence to help in arriving at the
Investment decision.
Page 6 of 46
The investments in the Demeter strategy could carry their own set of risks. Some of these
could include:
(i) Operational Risk: The risks that arise out of systemic issues within an
organization. Operational risk is intrinsic to any business. Every company may
have sector and company specific risks which may affect operations.
(ii) Regulatory Changes
These risks may arise if various concerned authorities amend the regulatory
framework, which could impact the Issuing Company.
(iii) Downturn in the market
There can be a down turn in the market in which the issuing Company operates
which can lead to decrease in profit margins of the Issuing Company.
Kindly refer Section III below for other features of this strategy.
Fees and Expenses: Defined in Section II below
2. Excel Portfolio
Introduction
Excel Portfolio is a strategy focused on investing only in rated securities such as debt
investments, preference capital, commercial paper, corporate bonds tax free bonds and pass
through certificates across maturities, credit quality and yields and which typically have
some form of non-promoter equity interest. Investments would be made only in investment
grade and above securities. The strategy would strive to prioritize income over capital
appreciation in its portfolio. The strategy has been introduced in November 2016.
Investment Objective
The investment objective of the strategy is to prioritize income over capital appreciation
through interest, preference dividend and trading of securities (both in the short term and
over the long term) both in the primary and secondary markets.
Investment Horizon and Risk Return Profile
Excel portfolio is recommended for investors seeking to hold a debt portfolio with low to
moderate risk appetite expecting a moderate return over a long term horizon. Investment in
Excel Portfolio is recommended for a period of more than 3 years. Below is a pictoral
representation of the Excel strategy risk.
Low Moderate High
Page 7 of 46
RISK
Strategy
The investment philosophy of Excel strategy is that it is sector agnostic with a focus on
growing companies. The base case strategy is to buy and hold the low to moderate yield
debt instruments. However, sale at a premium before maturity will also be explored subject
to opportunities. Opportunistically, the portfolio will also target extracting returns for
market making for low to moderate yield debt instruments – buying and selling over a short
duration. The criteria for selecting securities to invest in the Demeter Portfolio would be that
the Issuer should be preferably backed by institutional Equity Investors, Keyman risk should
be minimum, and Issuers capability to repay the debt on the basis of cash flow generation
cited by the Issuer. In cases of Non banking finance companies and Micro Finance
Institutions, the Asset liability management would be ascertained rather than cash flow
generation for debt. . The Excel strategy will undertake to an extent as deemed fit by the
Portfolio Manager, opportunistic buying and selling of debt securities or any other
instrument in the portfolio to improve the returns earned by investors. However, in this
endeavour, the portfolio manager may on some occasions not receive suitable exit for the
securities thus bought in the portfolio. In such cases, the portfolio manager may either
decide to hold such security to maturity or to exit it at a loss when compared with the
purchase price.For investors entering the strategy partially or wholly through their current
holdings of debt instruments, the portfolio manager will seek to diversify these holdings to
reduce concentration of credit risk. As a possible implication, the yield in Internal Rate of
Return [IIR] terms and income paid out through regular coupons of the portfolio thus
achieved may be different (and lower) from that of their current holdings.
Asset Allocation
The portfolio will be invested in only investment grade & above securities as defined below
particularly debt investments, preference capital, commercial paper, corporate bonds tax
free bonds and pass through certificates across maturities, credit quality and yields and
which typically have some form of non-promoter equity interest. The portfolio manager may
decide to hold cash/liquid funds or any other debt mutual fund. The Excel portfolio will be
actively managed. The portfolio achieves significant diversification across real estate,
mezzanine debt and securitized debt and also amongst various borrowers within these
domains at a ticket size of only Rs. 25 lakhs. Some of the products to which the Excel
Portfolio may subscribe are as described below:
Structured Mezzanine Debt–These would include Non Convertible Debentures issued
by, high growth companies with good ROCE (Return on Capital Employed) whose end
use may be alternative to venture capital funding, equity like end use, however with
regular servicing of coupon.
Securitized Debt –Pass through certificate (PTC) issued on the basis of pool of
underlying loans to SMEs, microfinance, vehicle loans etc.
Repurchase Agreements (Repo) – Repo (Repurchase Option) is a formal agreement
between two counterparties where one party sells securities to another party with
the explicit intention of buying back the securities at a later date. The Portfolio
Manager shall enter into such Repo Agreements with counterparties holding
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government bonds where the seller of the government bonds agrees to buy back the
government bonds from the Portfolio Manager at a predetermined time and rate.
Benchmark and Targeted Yield
S&P BSE India Bond Index and state bank 5 year Fixed Deposit rate are the Indexes used for
Benchmarking the performance of Excel portfolio.The Excel strategy is mid yield compared
to fixed deposits issued by Banks. The Excel Portfolio will aim to generate 5-7 % more than 5
year Fixed Deposit issued by State Bank of India.
Performance of Strategy
Performance of the Excel Portfolio is measured at six monthly intervals and is shown vis a vis
the benchmark in the Risk Disclosure Document filed by the Portfolio Manager with SEBI
every six months or upon occurring of any material change. The Portfolio Manager shall use
measurement tools like Modified duration, Macaulay’s duration to measure price sensitivity
of the investments and to determine the time required to recover the present value of all
cash flows from the portfolio. Prior to opting to invest in the Excel Portfolio, prospective
clients shall be shown returns till date of a model portfolio comprising the securities in which
the Excel portfolio is invested. The increase in portfolio value between consecutive time
periods indicates income (interest / dividend) accrual. The subsequent decline occurs due to
a payout to the investor from the issuer as well as a deduction of management fees. This
process may continue till the investor exits the strategy. Clients can view the performance
details in the Risk Disclosure Document uploaded on www.karvycapital.com.
Securities
Investments would be made in all types of debt securities (which may or may not be in
dematerialized form) including but not limited to debentures of any maturity (fixed, floating,
Variable Coupon, and equity index /stocks /stocks basket linked, real estate backed) which
may be listed, unlisted, convertible, non-convertible, secured, unsecured, rated, , Securitised
Debt, instruments with debt like features (eg. Compulsorily redeemable preference shares),
Pass Through Certificates, Bonds, Government securities issued or guaranteed by Central or
State Government, corporate debt of both public and private sector undertakings, securities
issued by banks (both public and private sector) and development financial institutions, fixed
deposits, commercial papers, certificate of deposit, trade bills, treasury bills and other
money market instruments, units of mutual funds, Exchange Traded Funds, units of SEBI
registered Alternative Investment Funds, floating rate debt securities and fixed income
derivatives like interest rate swaps, forward rate agreements and the like as may be
permitted by the Act, Rules and/or Regulations, guidelines and notifications in force from
time to time. These securities may be acquired through primary market issuances such as
subscription to Initial public offers, Follow on Public offers, Rights issues and private
placements of securities, secondary market purchases, auctions held by the Reserve Bank of
India, open market sales of securities conducted by Reserve Bank of India and the like.
The Portfolio manager may buy securities which have equity like nomenclature while the
features in terms of returns and convertibility will be like debt. These instruments would
include but not be limited to securities like non convertible compulsorily redeemable
preference shares, optionally convertible preference shares and some Optionally
convertible debentures.
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The Portfolio may also use derivative instruments – Futures and Options – for hedging and
rebalancing of the portfolio. Derivative Instruments shall, however, not be used in case of
NRI investors.
Investment in listed/publicly traded securities will be valued on the day end’s NAV/closing
price. Investment in other debt instruments will be valued as per valuation provided by the
Issuer.
With respect to the debentures being bought by Karvy Capital Limited as Discretionary
Portfolio Manager for its clients in Excel strategy, clients may please note the following:
Karvy Capital Limited as an NBFC / any Karvy Group entity may assist the Issuer to structure
the debenture issuance for the purpose of raising capital through the private placement
route. Karvy Capital Limited as an NBFC / any Karvy Group entity may actively associate with
the Issuer for structuring of the security in relation to the debentures, preparation of the
term sheets and related documents for sharing product details with prospective clients and
for appointment of key agents such as trustee, escrow agent, legal counsel and the like.
Karvy Capital Limited may also be the “Debenture Holder Representative and Calculating
Agent” thereby having the power to approve amongst other things - dilution of promoter
stake in the Issuer company, disbursal of amounts from escrow account to the Issuer , any
change in the security cover for the debentures and without whose consent the above
cannot occur. As a Calculating Agent, Karvy Capital Limited calculates the amount of interest
and final redemption amount due to the debenture holders.
For this, Karvy Capital Limited as an NBFC / any Karvy Group entity may receive a payment
from the Issuer which could be structured as advisory fee, discount on such debentures to
Karvy Capital Limited[NBFC] or the Karvy group entity at the time of first purchase or a
combination of the two.
Alongside, Karvy Capital Limited as an NBFC shall continue to undertake distribution activity
with regard to the said debentures i.e to downsell the debentures to prospective clients
other than the PMS customers.
In addition to downselling by Karvy Capital Limited {NBFC} as mentioned above, Karvy Capital
Limited (Portfolio Manager) may purchase debentures for clients of the Excel strategy
through the below routes as well:
c. Primary issuance of debentures by an Issuer subscription to the debentures
by Karvy Capital PMS.
d. Offer for secondary sale of debentures by third party debenture holder(s)
Purchase of debentures by Karvy Capital PMS.
e. The Portfolio Manager may, when offering Discretionary Portfolio
management services , at its discretion, purchase securities from client()s of
one discretionary portfolio management strategy for client(s) of another
discretionary portfolio management strategy or from third party at par value
Additionally,
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h. The debentures which the Portfolio Manager may invest in for the client
may or may not have some form of collateral backing them. Such
collateral may include one or more amongst the following – real estate
assets, shares of the issuing company, shares of other companies related
to the issuing company, other listed or unlisted shares, escrow of
cashflows, brand, patents, fixed assets of the company etc. However,
depending on the specific collateral used and as per the interpretation of
the Companies Act, 2013 the debentures may be deemed to be secured
or unsecured in nature.
i. Investment in Instruments that are listed may not be backed by any
collateral.
j. Investments in preference capital issues may not be backed by any
collateral and would be subject to the Company Law regulations or any
other statutes that may govern their issuance from time to time.
k. Investing in any tranche of a Pass through certificate may not be backed
by any collateral.
l. Owing to the credit risk of debt that the strategy is investing into, the
preservation of capital is not guaranteed. In case of a default by issuer in
any of the underlying securities, the trustees would endeavour to
recover the principal and the interest for the investors but there is a risk
of erosion of the principal invested in the strategy by the investor.
Additionally, the recovery process in case of a default may take time to
be implemented. Hence, at the level of each individual instrument, there
exists a risk of partial or complete capital erosion in case of a default by
the issuer.
m. The securities invested into by the Excel strategy will have credit quality
of a wide range and hence a varying amount of credit risk. Investment
will be made only in investment grade & above securities. The issuing
company’s latest available credit rating will be considered. The rating of
the securities or the issuing company will be investment grade.
n. The Portfolio Manager will endeavour to follow stringent due diligence
process while selecting the securities. The diligence process will typically
consist of Management Analysis, Financial Analysis, Product Analysis,
Industry Analysis, Buyer/supplier Analysis, cash flow analysis and
company/product life cycle analysis. The Portfolio Manager may use
services of reputed external/third party agencies for Valuation, Financial
and Legal Diligence to help in arriving at the Investment decision.
The investments in the Excel strategy could carry their own set of risks. Some of these could
include:
(iv) Operational Risk: The risks that arise out of systemic issues within an
organization. Operational risk is intrinsic to any business. Every company may
have sector and company specific risks which may affect operations.
(v) Regulatory Changes
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These risks may arise if various concerned authorities amend the regulatory
framework, which could impact the Issuing Company.
(vi) Downturn in the market
There can be a down turn in the market in which the issuing Company operates
which can lead to decrease in profit margins of the Issuing Company.
Kindly refer Section III below for other features of this strategy.
Fees and Expenses: Defined in Section II below
3. Aegis Portfolio
Introduction Aegis Portfolio is designed for those investors who seek long-term capital appreciation from
their asset allocation to market linked debentures, non-convertible debentures, debt,
preference shares, equities, gold and other asset classes which are available through either
exchange traded products or through mutual funds or over the counter products.
Investment Objective
The investment objective of the Strategy is to generate long term capital appreciation of
wealth through a portfolio of market linked debentures, non-convertible debentures, debt,
preference shares, equity, gold ETFs and other asset classes which are available through
either exchange traded products or through mutual funds or over the counter products.
Investment Horizon and Risk Return Profile
This portfolio is recommended for investors seeking to hold primarily a market linked
debenture portfolio with moderate risk appetite expecting a market linked upside over
medium to long term horizon. Investment in Aegis is recommended for a period of more
than 3 years.
Strategy
The investment philosophy of Aegis strategy is that it is sector agnostic with a focus on
growing companies with a profitable track record. The base case strategy is to buy and hold
the instruments. The Aegis strategy will undertake to an extent as deemed fit by the
Portfolio Manager, opportunistic buying and selling of securities or any other instrument in
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the portfolio to improve the returns earned by investors. However, in this endeavor, the
portfolio manager may on some occasions not receive suitable exit for the securities thus
bought in the portfolio. In such cases, the portfolio manager may either decide to hold such
security to maturity or to exit it at a loss when compared with the purchase price. For
investors entering the strategy partially or wholly through their current holdings, the
portfolio manager may seek to diversify these holdings to reduce concentration of credit risk.
Asset Allocation
The portfolio aims to generate returns through both Debt & Equity allocation. Equity
component of the strategy would include investments in Market Linked Debentures and
debt component of the strategy will include investments in non-convertible debentures,
debt, preference shares, debt instruments while investment would also be made in mutual
funds and other asset classes in a proportion deemed appropriate for the investor and the in
accordance with the market scenario.
Investors can choose to allocate their funds in the below manner when opting for Aegis
strategy:
Option 1: 70% of the portfolio to be allocated to investments in debt securities and the
remaining 30% of the portfolio to be invested in market linked debentures;
Option 2: 40% of the portfolio to be allocated to investments in debt securities and the
remaining 60% of the portfolio to be invested in market linked debentures;
Option 3: Entire portfolio to be allocated to investment in market linked debentures only
Benchmark and Targeted Yield
BSE 500; S&P BSE India Bond Index and Rate of Interest of 5 year Fixed Deposit issued by
State Bank of India are used for benchmarking the performance of Aegis portfolio. The equity
component of the Aegis Portfolio will be benchmarked against BSE 500 while the debt
component will be benchmarked against S&P BSE India Bond Index. Further, the debt
component of the Aegis strategy will be invested in debt instruments to aim to generate 5-
7% more returns than rate of interest of 5 year Fixed Deposit issued by State Bank of India.
Performance of Strategy
Performance of the Aegis Portfolio is measured at six monthly intervals and is shown vis a vis
the benchmark in the Disclosure Document filed by the Portfolio Manager with SEBI every six
months or upon occurring of any material change. Clients can also view the performance
details in the Risk Disclosure Document uploaded on www.karvycapital .com.
Securities
Investments may be made in all types of debt securities (which may or may not be in
dematerialized form) including but not limited to listed, unlisted, convertible, non-
convertible, secured, unsecured, rated or unrated, market linked debentures of any
maturity, and acquired through secondary market purchases, RBI auctions, open market
sales conducted by RBI etc., other public offers, bilateral offers, placements, rights, offers,
negotiated deals, etc. They could include Securitised Debt, instruments with debt like
features (eg. Compulsorily redeemable preference shares), Pass Through Certificates,
Debentures (fixed, floating, Variable Coupon, and equity index /stocks /stocks basket linked,
Page 13 of 46
real estate backed), Bonds, Government securities issued or guaranteed by Central or State
Government, corporate debt of both public and private sector undertakings, securities
issued by banks (both public and private sector) and development financial institutions, fixed
deposits, commercial papers, certificate of deposit, trade bills, treasury bills and other
money market instruments, units of mutual funds, ETFs, units of SEBI registered AIFs,
floating rate debt securities and fixed income derivatives like interest rate swaps, forward
rate agreements etc. as may be permitted by the Act, Rules and/or Regulations, guidelines
and notifications in force from time to time.
Investments may be made in various convertible/non-convertible and/or cumulative/non-
cumulative preference shares, convertible and/or cumulative/non-cumulative debentures,
bonds and warrants carrying the right to obtain equity shares, equity and equity related
securities including but not limited to stocks, units of mutual funds, ETFs and other eligible
modes of investment as may permitted by the Regulations from time to time. Investments
may be made in securities acquired through secondary market purchases, open market
sales/auctions, Initial Public Offers (IPOs), other public offers, bilateral offers, placements,
rights, offers, negotiated deals, etc. These securities may be listed or unlisted.
Investments may also be made in gold ETFs and other asset classes which are available
through either exchange traded products or through mutual funds or over the counter
products.
The Portfolio may also use derivative instruments – Futures and Options. Derivative
Instruments shall, however, not be used in case of NRI investors.
Investment in equities will be valued on the closing price of that equity at NSE. In case of
investments in any stocks listed on BSE only, the same will be valued based on the closing
price of that equity at BSE. Investment in Mutual Funds and ETFs will be valued on the day
end’s NAV.
Debt investment in listed/publicly traded securities will be valued on the day end’s
NAV/closing price. Investment in other debt instruments will be valued as per valuation
provided by the Issuer
Kindly refer Section III below for other features of this strategy.
Fees and Expenses: Defined in Section II below5. Aegis Portfolio
4. Brands Equity Portfolio
Introduction Brands Equity Portfolio aims to invest in companies with a strong brand recall to generate long term capital appreciation. The portfolio will comprise of some of the best brands and includes companies with not only a strong consumer franchise but also includes names with a strong institutional recall. Strong brands tend to have a sustainable and consistent competitive advantage, strong economic moat, good quality of earnings, credible management and good corporate governance. Investing in time-tested all-weather brands
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are one of the most effective methods of creating wealth over the long term by sharing in their prosperity and success while riding the periodic equity market volatility.
It is designed for those Investors who seek long term capital appreciation from equity
allocation to this strategy. The portfolio will invest in stocks across all market capitalization
categories.
Investment Objective
The investment objective of the strategy is to generate growth of capital and achieve returns over the benchmark index by investing in companies with not only a strong consumer franchise but also includes names with a strong institutional recall. Investment Horizon and Risk Return Profile
The Brands Equity Portfolio by the philosophy itself is a long term investment strategy. It is
recommended for investors with a high risk appetite expecting a high return over medium to
long term horizon and who seek to hold an equity portfolio of companies .
Below is a pictoral representation of the Brands Equity Portfolio strategy risk.
Strategy
The investment philosophy of the Brands Equity Portfolio is that it will focus on growing
companies in this theme.
The Brands Equity portfolio aims to achieve sustainable growth at a reasonable rate thereby
generating steady returns. The portfolio management style is active with close monitoring
and review of portfolio positions. Investments are research driven. Fundamental research
and analytical rigor are used to arrive at margin of safety. Sound risk management is
followed. Risk mitigation is done to minimize portfolio downside and is achieved by regular
study of extraneous risks and by diversifying across companies under this theme. Discipline is
followed – Risks which are not understood are avoided. Price value gap is regularly
monitored.
The Brands Equity Portfolio aims to achieve superior compounding by using the following
investment strategy:
1. Long Term Perspective is maintained as price discovery might take time with adequate margin of safety. Investment is high conviction driven and long only prospects are considered;
2. Risk mitigation is achieved by regular study of extraneous risks. Risk is minimized by diversifying across economic themes, sectors and companies;
3. Investments are research driven. Fundamental research and analytical rigor are used to arrive at margin of safety;
4. The objective is to achieve sustainable growth at a reasonable rate;
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5. Discipline is followed – Risks which are not understood are avoided. Price value gap is regularly monitored.
6. Focused portfolio with adequate stock diversification.
Asset Allocation
The Brands Equity Portfolio will seek to remain substantially invested in Equities or Equities
related instruments at all times. The cash in the portfolio may be invested in Liquid Funds or
Liquid Bees.
Benchmark
The Brands Equity portfolio will be benchmarked against the BSE 500 Index.
Performance of Strategy
Performance of the Brands Equity Portfolio shall be measured at six monthly intervals and is
shown vis a vis the benchmark in the Disclosure Document filed by the Portfolio Manager
with SEBI every six months or upon occurring of any material change. Clients can also view
the performance details in the Risk Disclosure Document uploaded on
www.karvycapital .com.
Securities
Investments will be made in stocks, mutual funds and Exchange Traded Funds (ETF). The
Portfolio will also use derivative instruments – Futures and Options – for hedging and
rebalancing of the portfolio.
Investment in equities will be valued on the closing price of that stock at NSE. In case of
investments in any stocks listed on BSE only, the same will be valued based on the closing
price of that stock in BSE. Investment in “Futures and Options”, used for hedging, shall be
valued at actual cash margins paid against F&O contracts, summed with Mark to Market
profit / loss computed on the basis of closing price of such contracts.
Kindly refer Section III below for other features of this strategy.
Fees and Expenses: Defined in Section II below
5. Lifestyle Equity Portfolio
Introduction
Lifestyle Equity Portfolio aims to invest in companies that offer lifestyle choices with a strong brand recall among the affluent urban retail consumers. The portfolio will comprise established and emerging lifestyle consumer stories that are primed to ride the India growth story. As discretionary spending power of the Indian consumer increases, there is a marked shift towards brands offering aspirational lifestyle choices. As the share of wallet for discretionary spend goes up due to lifestyle improvements, participating in the prosperity of these Companies is a smart choice.
Page 16 of 46
It is designed for those Investors who seek long term capital appreciation from equity
allocation to this strategy. The portfolio will invest in stocks across all market capitalization
categories.
Investment Objective
The investment objective of the Lifestyle Equity strategy is to generate growth of capital and
achieve returns over the benchmark index through long term investing. Investments would
be made in companies which have a strong and sustainable business model and are growth
oriented.
Investment Horizon and Risk Return Profile
The Lifestyle Equity Portfolio is recommended for investors with a high risk appetite seeking
a high return over medium to long term horizon and who seek to hold equity portfolio of
established and emerging lifestyle consumer companies.
Below is a pictoral representation of the Lifestyle Equity strategy risk:
Strategy
The investment philosophy of the Lifestyle Equity Portfolio is that it will focus on growing
companies in this theme.
The Lifestyle Equity portfolio aims to achieve sustainable growth at a reasonable rate
thereby generating steady returns. The portfolio management style is active with close
monitoring and review of portfolio positions. Investments are research driven. Fundamental
research and analytical rigor are used to arrive at margin of safety. Sound risk management
is followed. Risk mitigation is done to minimize portfolio downside and is achieved by regular
study of extraneous risks and by diversifying across companies under this theme. Discipline is
followed – Risks which are not understood are avoided. Price value gap is regularly
monitored.
The Lifestyle Equity Portfolio aims to achieve superior compounding by using the following
investment strategy:
1. Long Term Perspective is maintained as price discovery might take time with adequate margin of safety. Investment is high conviction driven and long only prospects are considered;
2. Risk mitigation is achieved by regular study of extraneous risks. Risk is minimized by diversifying across economic themes, sectors and companies;
Page 17 of 46
3. Investments are research driven. Fundamental research and analytical rigor are used to arrive at margin of safety;
4. The objective is to achieve sustainable growth at a reasonable rate; 5. Discipline is followed – Risks which are not understood are avoided. Price value
gap is regularly monitored. 6. Focused portfolio with adequate stock diversification.
Asset Allocation
The Lifestyle Equity Portfolio will seek to remain substantially invested in Equities or Equities
related instruments at all times. The cash in the portfolio may be invested in Liquid Funds or
Liquid Bees.
Benchmark
The Lifestyle Equity portfolio will be benchmarked against the BSE 500 Index.
Performance of Strategy
Performance of the Lifestyle Equity Portfolio shall be measured at six monthly intervals and
is shown vis a vis the benchmark in the Disclosure Document filed by the Portfolio Manager
with SEBI every six months or upon occurring of any material change. Clients can also view
the performance details in the Risk Disclosure Document uploaded on
www.karvycapital .com.
Securities
Investments will be made in stocks, mutual funds and Exchange Traded Funds (ETF). The
Portfolio will also use derivative instruments – Futures and Options – for hedging and
rebalancing of the portfolio.
Investment in equities will be valued on the closing price of that stock at NSE. In case of
investments in any stocks listed on BSE only, the same will be valued based on the closing
price of that stock in BSE. Investment in “Futures and Options”, used for hedging, shall be
valued at actual cash margins paid against F&O contracts, summed with Mark to Market
profit / loss computed on the basis of closing price of such contracts.
Kindly refer Section III below for other features of this strategy.
Fees and Expenses: Defined in Section II below
6. Economic Reforms Equity Portfolio
Introduction
Economic Reforms Equity Portfolio aims to invest in companies which are directly related to the reforms in the government policies. Investing in sectors and companies in anticipation of a change in policy or post policy declarations. Analyzing the impact of policy changes, and investing in those sectors and companies. GST and hence formalization of the economy, or government policy on developing inland water ways, and hence increasing business of dredging companies, can be a few examples.
Page 18 of 46
Many sectors await clarity and direction in the form of reforms in extant policies that were
framed to address the requirements of a different economic context. Sometimes policy
making is unable to keep pace with changing economic realities owing to either the sheer
pace of change or different priorities. Economic reforms are a continuous process as no
policy is relevant for all macro conditions. Hence no sector in the economy can claim to be
immune from the need for continuous progressive government reforms. Participating in the
sectors that present an opportunity for reforms is an effective approach to scout for the
golden mean of investing- 1. Growth which is possible due to reforms and 2. Value due to
the current opportunity being contrarian.
It is designed for those Investors who seek long term capital appreciation from equity
allocation to this strategy. The portfolio will invest in stocks across all market capitalization
categories.
Investment Objective
The investment objective of the Economic Reforms Equity Portfolio is to generate growth of
capital and achieve returns over the benchmark index through long term investing.
Investments would be made in companies which have a strong and sustainable business
model and are growth oriented.
Investment Horizon and Risk Return Profile
This Economic Reforms Equity Portfolio is recommended for investors with a high risk
appetite expecting a high return over medium to long term horizon from holdings in an
equity portfolio of companies that benefit from reforms in policies of Government of India
ies,.
Below is a pictoral representation of the Economic Reforms Equity Portfolio risk:
Strategy
The investment philosophy of the Economic Reforms Equity Portfolio is that it will focus on
growing companies in this theme.
The portfolio aims to achieve sustainable growth at a reasonable rate thereby generating
steady returns. The portfolio management style is active with close monitoring and review of
portfolio positions. Investments are research driven. Fundamental research and analytical
rigor are used to arrive at margin of safety. Sound risk management is followed. Risk
Page 19 of 46
mitigation is done to minimize portfolio downside and is achieved by regular study of
extraneous risks and by diversifying across companies under this theme. Discipline is
followed – Risks which are not understood are avoided. Price value gap is regularly
monitored.
The Portfolio aims to achieve superior compounding by using the following investment
strategy:
1. Long Term Perspective is maintained as price discovery might take time with adequate margin of safety. Investment is high conviction driven and long only prospects are considered;
2. Risk mitigation is achieved by regular study of extraneous risks.Risk is minimized by diversifying across economic themes, sectors and companies;
3. Investments are research driven. Fundamental research and analytical rigor are used to arrive at margin of safety;
4. The objective is to achieve sustainable growth at a reasonable rate; 5. Discipline is followed – Risks which are not understood are avoided. Price value
gap is regularly monitored. 6. Focused portfolio with adequate stock diversification.
Asset Allocation
The Economic Reforms Equity Portfolio will seek to remain substantially invested in Equities
or Equities related instruments at all times. The cash in the portfolio may be invested in
Liquid Funds or Liquid Bees.
Benchmark and Targeted Yield
The Economic Reforms Equity Portfolio will be benchmarked against the BSE 500 Index.
Performance of Strategy
Performance of the Economic Reforms Equity Portfolio shall be measured at six monthly
intervals and is shown vis a vis the benchmark in the Disclosure Document filed by the
Portfolio Manager with SEBI every six months or upon occurring of any material change.
Clients can also view the performance details in the Risk Disclosure Document uploaded on
www.karvycapital .com.
Securities
Investments will be made in stocks, mutual funds and Exchange Traded Funds (ETF). The
Portfolio will also use derivative instruments – Futures and Options – for hedging and
rebalancing of the portfolio.
Investment in equities will be valued on the closing price of that stock at NSE. In case of
investments in any stocks listed on BSE only, the same will be valued based on the closing
price of that stock in BSE. Investment in “Futures and Options”, used for hedging, shall be
valued at actual cash margins paid against F&O contracts, summed with Mark to Market
profit / loss computed on the basis of closing price of such contracts.
Kindly refer Section III below for other features of this strategy.
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Fees and Expenses: Defined in Section II below
7 . Rural Consumption Equity Portfolio
Introduction Rural Consumption Equity Portfolio focuses on businesses that have built strong rural
franchises and benefit from the prosperity in the countryside. Increase in MSP [Minimum
Support Price] which leads to increase in surplus cash in the hands of the farmers, which
boosts consumption,focus on irrigation, mechanization of farm equipment, which lead to
higher sales of irrigation equipment and tractors etc. reforms in the food processing sector,
focus on rural housing, health and sanitation, and higher budgetary support from the
government are some of the ways which will lead to higher per capita income for rural India.
As the Government would always factor in the needs of the rural economy, investing in such
businesses that are a direct play on rural lifestyle provides great diversification benefits to
the portfolio while allowing wealth creation in a segment that touches the lives of more than
50% of Indians.
It is designed for those Investors who seek long term capital appreciation from equity
allocation to this strategy. The portfolio will invest in stocks across all market capitalization
categories.
Investment Objective
The investment objective of the Rural Consumption Equity Portfolio is to generate growth of
capital and achieve returns over the benchmark index through long term investing.
Investments would be made in companies which have a strong and sustainable business
model and are growth oriented.
Investment Horizon and Risk Return Profile
The Rural Consumption Equity Portfolio is recommended for investors seeking to hold
equity portfolio of companies that have created strong rural frachisees, with a high risk
appetite expecting a high return over medium to long term horizon
Below is a pictoral representation of the Rural Consumption Equity Portfolio risk:
Page 21 of 46
Strategy
The investment philosophy of the Rural Consumption Equity Portfolio is that it will focus on
growing companies in this theme.
The portfolio aims to achieve sustainable growth at a reasonable rate thereby generating
steady returns. The portfolio management style is active with close monitoring and review of
portfolio positions. Investments are research driven. Fundamental research and analytical
rigor are used to arrive at margin of safety. Sound risk management is followed. Risk
mitigation is done to minimize portfolio downside and is achieved by regular study of
extraneous risks and by diversifying across companies under this theme. Discipline is
followed – Risks which are not understood are avoided. Price value gap is regularly
monitored.
The Rural Consumption Equity Portfolio aims to achieve superior compounding by using the
following investment strategy:
1. Long Term Perspective is maintained as price discovery might take time with adequate margin of safety. Investment is high conviction driven and long only prospects are considered;
2. Risk mitigation is achieved by regular study of extraneous risks. Risk is minimized by diversifying across economic themes, sectors and companies;
3. Investments are research driven. Fundamental research and analytical rigor are used to arrive at margin of safety;
4. The objective is to achieve sustainable growth at a reasonable rate; 5. Discipline is followed – Risks which are not understood are avoided. Price value
gap is regularly monitored. 6. Focused portfolio with adequate stock diversification.
Asset Allocation
The Rural Consumption Equity Portfolio will seek to remain substantially invested in Equities
or Equities related instruments at all times. The cash in the portfolio may be invested in
Liquid Funds or Liquid Bees.
Benchmark
The Rural Consumption Equity portfolio will be benchmarked against the BSE 500 Index
Performance of Strategy
Performance of the Rural Consumption Equity Portfolio shall be measured at six monthly
intervals and is shown vis a vis the benchmark in the Disclosure Document filed by the
Portfolio Manager with SEBI every six months or upon occurring of any material change.
Clients can also view the performance details in the Risk Disclosure Document uploaded on
www.karvycapital .com.
Securities
Page 22 of 46
Investments will be made in stocks, mutual funds and Exchange Traded Funds (ETF). The
Portfolio will also use derivative instruments – Futures and Options – for hedging and
rebalancing of the portfolio.
Investment in equities will be valued on the closing price of that stock at NSE. In case of
investments in any stocks listed on BSE only, the same will be valued based on the closing
price of that stock in BSE. Investment in “Futures and Options”, used for hedging, shall be
valued at actual cash margins paid against F&O contracts, summed with Mark to Market
profit / loss computed on the basis of closing price of such contracts.
Kindly refer Section III below for other features of this strategy.
Fees and Expenses: Defined in Section II below
8. Urban Inflation Equity Portfolio
Introduction Urban Inflation Equity Portfolio aims to invest in sectors such as Healthcare, Housing, and Lifestyle which experience materially higher inflation compared to the rest of the economy. Consumer Price Inflation (CPI) as measured by the government gives higher weightage to basic elements like food, housing, clothing, transportation etc. which covers the basic consumption elements. Urban Inflation for an affluent urban Indian family is the cost escalation in his expense basket which is very unlike the basket of CPI. It includes expenses on healthcare, recreation, travel, luxury clothing and goods, and other lifestyle related expenses. The affluent middle-aged Indian is responsible for building her own social security while maintaining her lifestyle as she steps into the sunset of her career in a few decades from now. Empirical and anecdotal evidence would suggest that the inflation experienced on account of social security related areas such as Healthcare and Housing or lifestyle related expenses for an urban Indian has little correlation to the consumer price inflation (CPI) being targeted by the policy makers. An effective approach to build a social security corpus and protect inflation adjusted lifestyle would be to invest and grow with the leaders in such sectors who in turn would benefit the most from the surging demand.
It is designed for those Investors who seek long term capital appreciation from equity
allocation to this strategy. The portfolio will invest in stocks across all market capitalization
categories.
Investment Objective
The investment objective of the Urban Inflation Equity Portfolio is to generate growth of
capital and achieve returns over the benchmark index through long term investing.
Investments would be made in companies which have a strong and sustainable business
model and are growth oriented.
Investment Horizon and Risk Return Profile
The Urban Inflation Equity Portfolio is recommended for investors with a high risk appetite
expecting a high return over medium to long term horizon and who seek to hold a equity
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portfolio in sectors like healthcare, housing and lifestyle. Below is a pictoral representation
of the Urban Inflation Equity Portfolio risk
Strategy
The investment philosophy of the Urban Inflation Equity Portfolio is that it will focus on
growing companies in this theme.
The portfolio aims to achieve sustainable growth at a reasonable rate thereby generating
steady returns. The portfolio management style is active with close monitoring and review of
portfolio positions. Investments are research driven. Fundamental research and analytical
rigor are used to arrive at margin of safety. Sound risk management is followed. Risk
mitigation is done to minimize portfolio downside and is achieved by regular study of
extraneous risks and by diversifying across companies under this theme. Discipline is
followed – Risks which are not understood are avoided. Price value gap is regularly
monitored.
The Urban Inflation Equity Portfolio aims to achieve superior compounding by using the
following investment strategy:
1. Long Term Perspective is maintained as price discovery might take time with adequate margin of safety. Investment is high conviction driven and long only prospects are considered;
2. Risk mitigation is achieved by regular study of extraneous risks.Risk is minimized by diversifying across economic themes, sectors and companies;
3. Investments are research driven. Fundamental research and analytical rigor are used to arrive at margin of safety;
4. The objective is to achieve sustainable growth at a reasonable rate; 5. Discipline is followed – Risks which are not understood are avoided. Price value
gap is regularly monitored. 6. Focused portfolio with adequate stock diversification.
Asset Allocation
The Urban Inflation Equity Portfolio will seek to remain substantially invested in Equities or
Equities related instruments at all times. The cash in the portfolio may be invested in Liquid
Funds or Liquid Bees.
Benchmark
The Urban Inflation Equity Portfolio will be benchmarked against the BSE 500 Index.
Performance of Strategy
Performance of the Urban Inflation Equity Portfolio shall be measured at six monthly
intervals and is shown vis a vis the benchmark in the Disclosure Document filed by the
Portfolio Manager with SEBI every six months or upon occurring of any material change.
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Clients can also view the performance details in the Risk Disclosure Document uploaded on
www.karvycapital .com.
Securities
Investments will be made in stocks, mutual funds and Exchange Traded Funds (ETF). The
Portfolio will also use derivative instruments – Futures and Options – for hedging and
rebalancing of the portfolio.
Investment in equities will be valued on the closing price of that stock at NSE. In case of
investments in any stocks listed on BSE only, the same will be valued based on the closing
price of that stock in BSE. Investment in “Futures and Options”, used for hedging, shall be
valued at actual cash margins paid against F&O contracts, summed with Mark to Market
profit / loss computed on the basis of closing price of such contracts.
Kindly refer Section III below for other features of this strategy.
Fees and Expenses: Defined in Section II below
9. Wellness Equity Portfolio
Introduction Wellness Equity Portfolio is a thematic portfolio that invests in the ancient wisdom of Wellness- Health and Wealth. Health and Wealth are signs of wellness for the effect they have on individual empowerment, liberty and growth of an individual. Besides increasing per capita income and higher discretionary spending have led to better awareness and affordability for an affluent urban Indian to loosen her purse strings and embrace the world of wellness. In this universe there can be companies involved in health diagnostics, or hospitals, health clinics, or health clubs/ gymnasium companies and the like. This universe will also include banking and other financial companies which help preserve and increase wealth of the affluent Indian. Smart investing entails participating in themes such as Healthcare and Financial Services that not just attract one’s discretionary spend but also heralds “Wellness.”
It is designed for those Investors who seek long term capital appreciation from equity
allocation to this strategy. The portfolio will invest in stocks across all market capitalization
categories.
Investment Objective
The investment objective of the Wellness Equity Portfolio is to generate growth of capital
and achieve returns over the benchmark index through long term investing. Investments
would be made in companies which have a strong and sustainable business model and are
growth oriented.
Investment Horizon and Risk Return Profile
The Wellness Equity Portfoliois recommended for investors with a high risk appetite
expecting a high return over medium to long term horizon.
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Below is a pictoral representation of the Wellness Equity Portfolio risk
Strategy
The investment philosophy of the Wellness Equity Portfolio is that it will focus on growing
companies in this theme.
The portfolio aims to achieve sustainable growth at a reasonable rate thereby generating
steady returns. The portfolio management style is active with close monitoring and review of
portfolio positions. Investments are research driven. Fundamental research and analytical
rigor are used to arrive at margin of safety. Sound risk management is followed. Risk
mitigation is done to minimize portfolio downside and is achieved by regular study of
extraneous risks and by diversifying across companies under this theme. Discipline is
followed – Risks which are not understood are avoided. Price value gap is regularly
monitored.
The Wellness Equity Portfolio aims to achieve superior compounding by using the following
investment strategy:
1. Long Term Perspective is maintained as price discovery might take time with adequate margin of safety. Investment is high conviction driven and long only prospects are considered;
2. Risk mitigation is achieved by regular study of extraneous risks.Risk is minimized by diversifying across economic themes, sectors and companies;
3. Investments are research driven. Fundamental research and analytical rigor are used to arrive at margin of safety;
4. The objective is to achieve sustainable growth at a reasonable rate; 5. Discipline is followed – Risks which are not understood are avoided. Price value
gap is regularly monitored. 6. Focused portfolio with adequate stock diversification.
Asset Allocation
The Wellness Equity Portfolio will seek to remain substantially invested in Equities or
Equities related instruments at all times. The cash in the portfolio may be invested in Liquid
Funds or Liquid Bees.
Benchmark and Targeted Yield
The Wellness Equity Portfolio will be benchmarked against the BSE 500 Index.
Performance of Strategy
Performance of the Wellness Equity Portfolio shall be measured at six monthly intervals and
is shown vis a vis the benchmark in the Disclosure Document filed by the Portfolio Manager
with SEBI every six months or upon occurring of any material change. Clients can also view
the performance details in the Risk Disclosure Document uploaded on www.karvycapital
.com.
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Securities
Investments will be made in stocks, mutual funds and Exchange Traded Funds (ETF).
The Portfolio will also use derivative instruments – Futures and Options – for hedging
and rebalancing of the portfolio.
Investment in equities will be valued on the closing price of that stock at NSE. In case
of investments in any stocks listed on BSE only, the same will be valued based on the
closing price of that stock in BSE. Investment in “Futures and Options”, used for
hedging, shall be valued at actual cash margins paid against F&O contracts, summed
with Mark to Market profit / loss computed on the basis of closing price of such
contracts.
Kindly refer Section III below for other features of this strategy.
Fees and Expenses: Defined in Section II below
10. AIR Equity Portfolio (Asset Management, Insurance, Rating agencies) Equity Portfolio
Introduction A.I.R. (Asset Management, Insurance, Rating agencies) Equity Portfolio aims to invest in the
under penetrated, under represented (among BFSI) and high growth financial services sector
like insurance, asset management companies (AMCs), and rating agencies. Asset
management and Insurance are under penetrated in India presenting a multi-year high
growth opportunity. The portfolio also includes rating agencies, which is a highly
concentrated space and dominated by a few large players. As corporate borrowing increases
in quantum and penetrates emerging segments like Corporate bond markets, the need for a
measure of credit worthiness from the older and well entrenched rating agencies will only
increase. BFSI portfolios are routinely dominated by Banks and NBFCs to the exclusion of
material exposure to the emerging sectors of AIR in financial services. Investors focused on
participating in the high growth and under represented sectors would benefit from an
investment in the AIR portfolio.
It is designed for those Investors who seek long term capital appreciation from equity
allocation to this strategy. The portfolio will invest in stocks across all market capitalization
categories.
Investment Objective
The investment objective of the A.I.R. (Asset Management, Insurance, Rating agencies)
Equity Portfolio is to generate growth of capital and achieve returns over the benchmark
index through long term investing. Investments would be made in companies which have a
strong and sustainable business model and are growth oriented.
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Investment Horizon and Risk Return Profile
This AIR Equity Portfolio (Asset Management, Insurance, Rating agencies) Equity Portfolio
is recommended for investors seeking to hold a equity portfolio of listed companies which
are under penetrated, under represented (among BFSI) and high growth financial services
sector like insurance, asset management companies (AMCs), and rating agencies, with a high
risk appetite expecting a high return over medium to long term horizon
Below is a pictoral representation of the AIR Equity Portfolio (Asset Management,
Insurance, Rating agencies) Equity Portfolio risk:
Strategy
The investment philosophy of the AIR Equity Portfolio (Asset Management, Insurance,
Rating agencies) Equity Portfolio is that it will focus on growing companies in this theme.
The portfolio aims to achieve sustainable growth at a reasonable rate thereby generating
steady returns. The portfolio management style is active with close monitoring and review of
portfolio positions. Investments are research driven. Fundamental research and analytical
rigor are used to arrive at margin of safety. Sound risk management is followed. Risk
mitigation is done to minimize portfolio downside and is achieved by regular study of
extraneous risks and by diversifying across companies under this theme. Discipline is
followed – Risks which are not understood are avoided. Price value gap is regularly
monitored.
The Portfolio aims to achieve superior compounding by using the following investment
strategy:
1. Long Term Perspective is maintained as price discovery might take time with adequate margin of safety. Investment is high conviction driven and long only prospects are considered;
2. Risk mitigation is achieved by regular study of extraneous risks.Risk is minimized by diversifying across economic themes, sectors and companies;
3. Investments are research driven. Fundamental research and analytical rigor are used to arrive at margin of safety;
4. The objective is to achieve sustainable growth at a reasonable rate; 5. Discipline is followed – Risks which are not understood are avoided. Price value
gap is regularly monitored. 6. Focused portfolio with adequate stock diversification.
Page 28 of 46
Asset Allocation
The AIR Equity Portfolio (Asset Management, Insurance, Rating agencies) Equity Portfolio
will seek to remain substantially invested in Equities or Equities related instruments at all
times. The cash in the portfolio may be invested in Liquid Funds or Liquid Bees.
Benchmark and Targeted Yield
The AIR Equity Portfolio (Asset Management, Insurance, Rating agencies) Equity Portfolio
will be benchmarked against the BSE 500 Index.
Performance of Strategy
Performance of the AIR Equity Portfolio (Asset Management, Insurance, Rating agencies)
Equity Portfolio is measured at six monthly intervals and is shown vis a vis the benchmark in
the Disclosure Document filed by the Portfolio Manager with SEBI every six months or upon
occurring of any material change. Clients can also view the performance details in the Risk
Disclosure Document uploaded on www.karvycapital .com.
Securities
Investments will be made in stocks, mutual funds and Exchange Traded Funds (ETF).
The Portfolio will also use derivative instruments – Futures and Options – for hedging
and rebalancing of the portfolio.
Investment in equities will be valued on the closing price of that stock at NSE. In case
of investments in any stocks listed on BSE only, the same will be valued based on the
closing price of that stock in BSE. Investment in “Futures and Options”, used for
hedging, shall be valued at actual cash margins paid against F&O contracts, summed
with Mark to Market profit / loss computed on the basis of closing price of such
contracts.
Kindly refer Section III below for other features of this strategy.
Fees and Expenses: Defined in Section II below
11. MNC Equity Portfolio
Introduction MNC Equity Portfolio invests in multinational companies of repute and pedigree which are
listed on Indian Stock Exchanges and can capitalize on the India growth story as well as
leadership in exports. Most of the MNCs have performed across market cycles given the
stable fundamentals of their underlying businesses like strong brand equity, robust cash
flows, low financial leverage, technology leadership and strong corporate governance. World
over, it is well documented in the annals of investment history that well governed companies
have always created the most value over the long term. As India transitions from an
emerging market to a developed market over the next few decades, it is imperative that long
Page 29 of 46
term investment portfolios have an exposure to the MNC companies which offer a promise
of robust corporate governance.
It is designed for those Investors who seek long term capital appreciation from equity
allocation to this strategy. The portfolio will invest in stocks across all market capitalization
categories.
Investment Objective
The investment objective of the strategy is to generate growth of capital and achieve returns
over the benchmark index through long term investing. Investments would be made in
companies which have a strong and sustainable business model and are growth oriented.
Investment Horizon and Risk Return Profile
The MNC Equity Portfolio is recommended for investors with a high risk appetite expecting a
high return over medium to long term horizon seeking to hold a equity portfolio of
multinational companies which are listed on Indian Exchanges .Below is a pictoral
representation of the MNC Equity Portfolio risk:
Strategy
The investment philosophy of the MNC Equity Portfolio is that it will focus on growing
companies in this theme.
The MNC Equity Portfolio aims to achieve sustainable growth at a reasonable rate thereby
generating steady returns. The portfolio management style is active with close monitoring
and review of portfolio positions. Investments are research driven. Fundamental research
and analytical rigor are used to arrive at margin of safety. Sound risk management is
followed. Risk mitigation is done to minimize portfolio downside and is achieved by regular
study of extraneous risks and by diversifying across companies under this theme. Discipline is
followed – Risks which are not understood are avoided. Price value gap is regularly
monitored.
The MNC Equity Portfolio shall aim to achieve superior compounding by using the following
investment strategy:
1. Long Term Perspective is maintained as price discovery might take time with adequate margin of safety. Investment is high conviction driven and long only prospects are considered;
2. Risk mitigation is achieved by regular study of extraneous risks. Risk is minimized by diversifying across economic themes, sectors and companies;
3. Investments are research driven. Fundamental research and analytical rigor are used to arrive at margin of safety;
4. The objective is to achieve sustainable growth at a reasonable rate; 5. Discipline is followed – Risks which are not understood are avoided. Price value
gap is regularly monitored.
Page 30 of 46
6. Focused portfolio with adequate stock diversification.
Asset Allocation
The MNC Equity Portfolio will seek to remain substantially invested in Equities or Equities
related instruments at all times. The cash in the portfolio may be invested in Liquid Funds or
Liquid Bees.
Benchmark
The MNC Equity Portfolio will be benchmarked against the BSE 500 Index.
Performance of Strategy
Performance of the MNC Equity Portfolio shall be measured at six monthly intervals and is
shown vis a vis the benchmark in the Disclosure Document filed by the Portfolio Manager
with SEBI every six months or upon occurring of any material change. Clients can also view
the performance details in the Risk Disclosure Document uploaded on www.karvycapital
.com
Securities
Investments will be made in stocks, mutual funds and Exchange Traded Funds (ETF).
The Portfolio will also use derivative instruments – Futures and Options – for hedging
and rebalancing of the portfolio.
Investment in equities will be valued on the closing price of that stock at NSE. In case
of investments in any stocks listed on BSE only, the same will be valued based on the
closing price of that stock in BSE. Investment in “Futures and Options”, used for
hedging, shall be valued at actual cash margins paid against F&O contracts, summed
with Mark to Market profit / loss computed on the basis of closing price of such
contracts.
Kindly refer Section III below for other features of this strategy.
Fees and Expenses: Defined in Section II below
12Global Business Equity Portfolio
Introduction Global Business Equity Portfolio focuses on select companies which have built a strategic geographical presence and are expanding their footprints globally. Indian businesses are venturing into global markets on the back of opportunistic acquisitions while gaining leadership in high value exports and price leadership in certain other segments competing on scale like never before. The tail wind provided by a depreciating Rupee provides the much-needed boost periodically. Exposure to global businesses is important to diversify the India focused equity portfolios.
It is designed for those Investors who seek long term capital appreciation from equity
allocation to this strategy. The portfolio will invest in stocks across all market capitalization
categories.
Page 31 of 46
Investment Objective
The investment objective of the strategy is to generate growth of capital and achieve returns
over the benchmark index through long term investing. Investments would be made in
companies which have a strong and sustainable business model and are growth oriented.
Investment Horizon and Risk Return Profile
The Global Business Equity Portfolio is recommended for investors with a high risk appetite
expecting a high return over medium to long term horizon .
Below is a pictoral representation of the Global Business Equity Portfolio risk.
Strategy
The investment philosophy of the strategy is that it will focus on growing companies in this
theme.
The portfolio aims to achieve sustainable growth at a reasonable rate thereby generating
steady returns. The portfolio management style is active with close monitoring and review of
portfolio positions. Investments are research driven. Fundamental research and analytical
rigor are used to arrive at margin of safety. Sound risk management is followed. Risk
mitigation is done to minimize portfolio downside and is achieved by regular study of
extraneous risks and by diversifying across companies under this theme. Discipline is
followed – Risks which are not understood are avoided. Price value gap is regularly
monitored.
The Global Business Equity Portfolio aims to achieve superior compounding by using the
following investment strategy:
1. Long Term Perspective is maintained as price discovery might take time with adequate margin of safety. Investment is high conviction driven and long only prospects are considered;
2. Risk mitigation is achieved by regular study of extraneous risks.Risk is minimized by diversifying across economic themes, sectors and companies;
3. Investments are research driven. Fundamental research and analytical rigor are used to arrive at margin of safety;
4. The objective is to achieve sustainable growth at a reasonable rate; 5. Discipline is followed – Risks which are not understood are avoided. Price value
gap is regularly monitored. 6. Focused portfolio with adequate stock diversification.
Asset Allocation
Page 32 of 46
The Global Business Equity Portfolio will seek to remain substantially invested in Equities or
Equities related instruments at all times. The cash in the portfolio may be invested in Liquid
Funds or Liquid Bees.
Benchmark
The Global Business Equity Portfolio will be benchmarked against the BSE 500 Index.
Performance of Strategy
Performance of the Global Business Equity Portfolio is measured at six monthly intervals
and is shown vis a vis the benchmark in the Disclosure Document filed by the Portfolio
Manager with SEBI every six months or upon occurring of any material change. Clients can
also view the performance details in the Risk Disclosure Document uploaded on
www.karvycapital .com.
Securities
Investments will be made in stocks, mutual funds and Exchange Traded Funds (ETF). The
Portfolio will also use derivative instruments – Futures and Options – for hedging and
rebalancing of the portfolio.
Investment in equities will be valued on the closing price of that stock at NSE. In case of
investments in any stocks listed on BSE only, the same will be valued based on the closing
price of that stock in BSE. Investment in “Futures and Options”, used for hedging, shall be
valued at actual cash margins paid against F&O contracts, summed with Mark to Market
profit / loss computed on the basis of closing price of such contracts.
Kindly refer Section III below for other features of this strategy.
Fees and Expenses: Defined in Section II below
13Multiples Equity Portfolio
Introduction Multiples Equity Portfolio is focused on identifying deep value opportunities that are fundamentally mispriced. Such opportunities can be contrarian, undiscovered or awaiting a key reform to act as catalyst in their growth. They can represent leadership in a niche segment or can be a fallen Angel on the cusp of a turnaround. Essentially these are companies which are anticipated to have a high growth in profitability and also higher valuations as the ROCE (Return on Capital Employed) keeps improving. In traditional language they are called Multi baggers. The strategy is agnostic to market capitalization and follows a strictly bottoms-up approach. This is a high risk/return strategy with respect to the timing of achievement of business outcomes, discovery of the idea by the market and the attendant liquidity conditions and sentiment indicators. However a well-designed equity growth portfolio should contain a flavor of the multiples approach to wealth creation.
It is designed for those Investors who seek long term capital appreciation from equity
allocation to this strategy. The portfolio will invest in stocks across all market capitalization
categories.
Page 33 of 46
Investment Objective
The investment objective of the strategy is to generate growth of capital and achieve returns
over the benchmark index through long term investing. Investments would be made in
companies which have a strong and sustainable business model and are growth oriented.
Investment Horizon and Risk Return Profile
The Multiples Equity Portfolio is recommended for investors with high risk appetite
expecting a high return over medium to long term horizon
Below is a pictoral representation of the Multiples Equity Portfolio risk:
Strategy
The strategy is to identify companies that represent leadership in a niche segment or
seem to be on the cusp of a turnaround.
The investment philosophy of the strategy is that it will focus on growing companies in this
theme.
The portfolio aims to achieve sustainable growth at a reasonable rate thereby generating
steady returns. The portfolio management style is active with close monitoring and review of
portfolio positions. Investments are research driven. Fundamental research and analytical
rigor are used to arrive at margin of safety. Sound risk management is followed. Risk
mitigation is done to minimize portfolio downside and is achieved by regular study of
extraneous risks and by diversifying across companies under this theme. Discipline is
followed – Risks which are not understood are avoided. Price value gap is regularly
monitored.
The Multiples Equity Portfolio aims to achieve superior compounding by using the
following investment strategy:
1. Long Term Perspective is maintained as price discovery might take time with adequate margin of safety. Investment is high conviction driven and long only prospects are considered;
2. Risk mitigation is achieved by regular study of extraneous risks. Risk is minimized by diversifying across economic themes, sectors and companies;
3. Investments are research driven. Fundamental research and analytical rigor are used to arrive at margin of safety;
4. The objective is to achieve sustainable growth at a reasonable rate; 5. Discipline is followed – Risks which are not understood are avoided. Price value
gap is regularly monitored. 6. Focused portfolio with adequate stock diversification.
Asset Allocation
Page 34 of 46
The Multiples Equity Portfolio will seek to remain substantially invested in Equities or
Equities related instruments at all times. The cash in the portfolio may be invested in Liquid
Funds or Liquid Bees.
Benchmark
The Multiples Equity Portfolio will be benchmarked against the BSE 500 Index.
Performance of Strategy
Performance of the Multiples Equity Portfolio shall be measured at six monthly intervals
and is shown vis a vis the benchmark in the Disclosure Document filed by the Portfolio
Manager with SEBI every six months or upon occurring of any material change. Clients can
also view the performance details in the Risk Disclosure Document uploaded on
www.karvycapital .com.
Securities
Investments will be made in stocks, mutual funds and Exchange Traded Funds (ETF). The
Portfolio will also use derivative instruments – Futures and Options – for hedging and
rebalancing of the portfolio.
Investment in equities will be valued on the closing price of that stock at NSE. In case of
investments in any stocks listed on BSE only, the same will be valued based on the closing
price of that stock in BSE. Investment in “Futures and Options”, used for hedging, shall be
valued at actual cash margins paid against F&O contracts, summed with Mark to Market
profit / loss computed on the basis of closing price of such contracts.
Kindly refer Section III below for other features of this strategy.
Fees and Expenses: Defined in Section II below
.14 Plutus Portfolios
Introduction Plutus Portfolio is designed for investors seeking income and capital appreciation from their
asset allocation to debt, preference capital, and tax free bonds.
Plutus Portfolio is focused on investing only in rated and listed securities across debentures,
preference capital, corporate bonds, and tax free bonds across maturities, credit quality and
yields.
Investment Objective
The investment objective is invest in various instruments to generate cash flows and/or
capital appreciation and income through interest, preference dividend and trading (both in
the short term and over the long term) of securities in the primary or secondary markets and
to reduce concentration risk by diversifying risk across sectors and industries within sectors.
The portfolio will primarily consist of debt securities, preference capital, and tax free bonds.
Investment Horizon and Risk Return Profile
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Plutus portfolio is recommended for investors seeking to hold a debt portfolio with
moderate risk appetite expecting a moderate return over a long term horizon. Investment in
Plutus Portfolio is recommended for a period of more than 3 years.
Below is a pictorial representation of the Plutus strategy risk.
RISK
Strategy
The base case strategy is to build a moderate yield portfolio by buying and holding the debt
instruments across the yield spectrum (Low/moderate/high). However, sale at a premium
before maturity will also be explored subject to opportunities. Opportunistically, the
portfolio will also target extracting returns for market making for moderate to high yield
debt instruments – buying and selling over a short duration.
Asset Allocation
The portfolio will be predominantly invested in rated and listed debt securities (low,
moderate/ high yield) such as preference capital preference capital, corporate bonds, and
tax free bonds across maturities, credit quality and yields, which can be secured or
unsecured, and convertible or non-convertible using the securities defined below. The
underlying securities will be rated by credit rating agencies and listed on one or more
exchanges.
The Plutus portfolio may subscribe to :
Structured Mezzanine Debt – These would include Non Convertible Debentures issued by
profitable, high growth companies with good ROCE (Return on Capital Employed) whose end
use may be alternative to venture capital funding, equity like end use, however with regular
servicing of coupon. The Plutus portfolio shall seek to achieve significant diversification
across real estate, mezzanine debt and also amongst various borrowers within these
domains at an investment size of only Rs. 25 lakhs. The diversification will also be achieved
through spread of investments in different sectors and various industries within sectors.
The Plutus portfolio will be actively managed. The Portfolio Manager may decide to hold
cash/liquid funds or any other debt mutual fund.
Benchmark and Targeted Yield
S&P BSE India Corporate Bond Index and fixed deposit of 5 year tenure issued by State Bank
of India are used for benchmarking the performance of Plutus portfolio.
The strategy will target generating higher yields than Bank FD. The aim will be to generate
yields that are 7% -9% per annum higher than a 5-year SBI FD.
High Low Moderate
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Performance of Strategy
Prior to opting to invest in the Plutus Portfolio, prospective clients may be shown indicative
returns through a model portfolio comprising the securities in which the Plutus portfolio may
be invested. The Portfolio Manager shall use measurement tools like Modified duration,
Macaulay’s duration to measure price sensitivity of the investments and to determine the
time required to recover the present value of all cash flows from the portfolio.
Securities
Plutus Portfolio is focused on investing only in rated and listed securities.
Investments would be made in all types of rated and listed debt securities including but not
limited to debentures of any maturity (fixed, floating, Variable Coupon, and equity index
/stocks /stocks basket linked, real estate backed) which may be listed, convertible, non-
convertible, secured, unsecured, rated, instruments with debt like features (eg.
Compulsorily redeemable preference shares), Bonds, Government securities issued or
guaranteed by Central or State Government, corporate debt of both public and private
sector undertakings, securities issued by banks (both public and private sector) and
development financial institutions, treasury bills and other money market instruments, units
of mutual funds, Exchange Traded Funds, floating rate debt securities and fixed income
derivatives like interest rate swaps and the like as may be permitted by the Act, Rules and/or
Regulations, guidelines and notifications in force from time to time. These securities may be
acquired through primary market issuances such as subscription to Initial public offers,
Follow on Public offers, Rights issues and private placements of securities, secondary market
purchases, auctions held by the Reserve Bank of India, open market sales of securities
conducted by Reserve Bank of India and the like.
The Portfolio manager may buy securities which have equity like nomenclature while the
features in terms of returns and convertibility will be like debt. These instruments would
include but not be limited to securities like non convertible compulsorily redeemable
preference shares, optionally convertible preference shares and some optionally convertible
debentures.
Investment in listed/publicly traded securities will be valued on the day end’s NAV/closing
price. Investment in other debt instruments will be valued as per valuation provided by the
Issuer.
With respect to the debentures being bought by Karvy Capital Limited as Discretionary
Portfolio Manager for its clients in Plutus strategy, clients may please note the following:
Karvy Capital Limited as an NBFC / any Karvy Group entity may assist the Issuer in
structuring the debenture issuance for the purpose of raising capital through the private
placement route. Karvy Capital Limited as an NBFC / any Karvy Group entity may actively
associate with the Issuer for structuring of the security in relation to the debentures,
preparation of the term sheets and related documents for sharing product details with
Page 37 of 46
prospective clients and for appointment of key agents such as trustee, escrow agent, legal
counsel and the like.
Karvy Capital Limited may also be the “Debenture Holder Representative and Calculating
Agent” thereby having the power to approve amongst other things - dilution of promoter
stake in the Issuer company, disbursal of amounts from escrow account to the Issuer , any
change in the security cover for the debentures and without whose consent the above
cannot occur. As a Calculating Agent, Karvy Capital Limited calculates the amount of interest
and final redemption amount due to the debenture holders.
For this, Karvy Capital Limited as an NBFC / any Karvy Group entity may receive a payment
from the Issuer which could be structured as advisory fee, discount on such debentures to
Karvy Capital Limited[NBFC] or the Karvy group entity at the time of first purchase or a
combination of the two.
Alongside, Karvy Capital Limited as an NBFC shall continue to undertake distribution activity
with regard to the said debentures i.e to sell the debentures to prospective clients other
than the PMS customers.
In addition to selling by Karvy Capital Limited {NBFC} as mentioned above, Karvy Capital
Limited (Portfolio Manager) may purchase debentures for clients of the Plutus strategy
through the below routes as well:
Primary issuance of debentures by an Issuer. Subscription to the debentures by Karvy Capital
PMS.
Offer for secondary sale of debentures by third party debenture holder(s). Purchase of
debentures by Karvy Capital PMS.
The Portfolio Manager may, when offering Discretionary Portfolio management services , at
its discretion, purchase securities from client()s of one discretionary portfolio management
strategy for client(s) of another discretionary portfolio management strategy or from third
party at par value
Additionally,
The debentures which the Portfolio Manager may invest in for the client may or may not
have some form of collateral backing them. Such collateral may include one or more
amongst the following – real estate assets, shares of the issuing company, shares of other
companies related to the issuing company, other listed or unlisted shares, escrow of cash
flows, brand, patents, fixed assets of the company etc. However, depending on the specific
collateral used and as per the interpretation of the Companies Act, 2013 the debentures may
be deemed to be secured or unsecured in nature.
Investment in Instruments that are listed may not be backed by any collateral.
Page 38 of 46
Investments in preference capital issues may not be backed by any collateral and would be
subject to the Company Law regulations or any other statutes that may govern their issuance
from time to time.
Owing to the credit risk of debt that the strategy is investing into, the preservation of capital
is not guaranteed. In case of a default by issuer in any of the underlying securities, the
trustees would endeavor to recover the principal and the interest for the investors but there
is a risk of erosion of the principal invested in the strategy by the investor. Additionally, the
recovery process in case of a default may take time to be implemented. Hence, at the level
of each individual instrument, there exists a risk of partial or complete capital erosion in case
of a default by the issuer.
The securities invested into by the Plutus strategy will have credit quality of a wide range and
hence a varying amount of credit risk. The issuing company’s latest available credit rating will
be considered. The rating of the securities or the issuing company may be investment grade
or speculative grade.
The Portfolio Manager will endeavor to follow stringent due diligence process while selecting
the securities. The diligence process will typically consist of management analysis, financial
analysis, product analysis, industry analysis, buyer/supplier analysis, cash flow analysis and
company/product life cycle analysis. The portfolio manager may use services of reputed
external/third party agencies for valuation, financial and legal diligence to help in arriving at
the investment decision.
The criteria for Investment would be to look at proposals which have backing of institutional
Equity Investors where there is no Key man risk, return on Investment is more than cost of
borrowing and repayment is visible basis cash flow generation, In cases of Non banking
finance companies and Micro Finance Institutions, the Asset liability management would be
ascertained rather than cash flow generation for debt repayment
The investments in the Plutus strategy could carry their own set of risks. Some of these could
include:
Operational Risk: The risks that arise out of systemic issues within an organization.
Operational risk is intrinsic to any business. Every company may have sector and company
specific risks which may affect operations.
Regulatory Changes
These risks may arise if various concerned authorities amend the regulatory framework,
which could impact the Issuing Company.
Downturn in the market
There can be a down turn in the market in which the issuing Company operates which can
lead to decrease in profit margins for the Issuing Company.
Page 39 of 46
The Plutus strategy will undertake to an extent as deemed fit by the Portfolio Manager,
opportunistic buying and selling of debt securities or any other instrument in the portfolio to
improve the returns earned by investors. However, in this endeavor, the portfolio manager
may on some occasions not receive suitable exit for the securities thus bought in the
portfolio. In such cases, the portfolio manager may either decide to hold such security to
maturity or to exit it at a loss when compared with the purchase price. For investors entering
the strategy partially or wholly through their current holdings of debt instruments, the
portfolio manager will seek to diversify these holdings to reduce concentration of credit risk.
As a possible implication, the yield in Internal Rate of Return [IIR] terms including any interim
payouts may be different (and lower) from that of their current holdings.
Kindly refer Section III below for other features of this strategy.
Fees and Expenses: Defined in Section II below
. 15 Metis Portfolio
Introduction Metis Portfolio is designed for investors who seek long-term capital appreciation from their asset allocation to equities with a combination of investment strategies as described above viz:-.
1. Brands Equity Portfolio, 2. Lifestyle Equity Portfolio 3. Economic Reforms Equity Portfolio 4. Rural Consumption Equity Portfolio 5. Urban Inflation Equity Portfolio 6. Wellness Equity Portfolio 7. AIR Equity Portfolio 8. MNC Equity Portfolio 9. Global Business Equity Portfolio 10. Multiples Equity Portfolio
Portfolio manager has the option to allocate money across minimum 3 strategies and
maximum of 6 strategies at any given point of time. The weightage or each stock and
strategies will be decided by the fund manager not only based on the market condition from
time to time, but it will also be based on the clients risk apetite and risk profile. The aim is to
pick a combination of investment strategies for investing, which show a prospect of
maximum growth potential from time to time. The frequency of changing the portfolio etc.
would be at the descrition of the portfolio manager. The Metis portfolio will invest in stocks
across sectors and market capitalization categories. Some Shares / mutual funds may be
common across strategies chosen for the respective client.
Investment Objective
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The investment objective of the strategy is to generate growth of capital through a blend of
value, growth opportunistic and event driven investing.
Investment Horizon and Risk Return Profile
The Metis Portfolio is recommended for investors seeking to hold a equity portfolio
comprising of targeting themes and with a high risk appetite expecting a high return over
medium to long term horizon.
Below is a pictoral representation of the Brands Equity Portfolio strategy risk.
Strategy
Portfolio manager has the option to allocate money across minimum 3 strategies and
maximum of 6 strategies at any given point of time. The weightage or each stock and
strategies will be decided by the fund manager not only based on the market condition from
time to time, but it will also be based on the clients risk apetite and risk profile. The aim is to
pick themes for investing, which show a prospect of maximum growth potential from time
to time. The frequency of changing the portfolio etc. would be at the descrition of the
portfolio manager
The investment philosophy of the strategy is that it will focus on growing companies across
the selected themes.
The portfolio aims to achieve sustainable growth at a reasonable rate thereby generating
steady returns. The portfolio management style is active with close monitoring and review of
portfolio positions. Investments are research driven. Fundamental research and analytical
rigor are used to arrive at margin of safety. Sound risk management is followed. Risk
mitigation is done to minimize portfolio downside and is achieved by regular study of
extraneous risks and by diversifying across companies under this theme. Discipline is
followed – Risks which are not understood are avoided. Price value gap is regularly
monitored.
The Metis Portfolio aims to achieve superior compounding by using the following investment
strategy:
1. Long Term Perspective is maintained as price discovery might take time with adequate margin of safety. Investment is high conviction driven and long only prospects are considered;
2. Risk mitigation is achieved by regular study of extraneous risks.Risk is minimized by diversifying across economic themes, sectors and companies;
3. Investments are research driven. Fundamental research and analytical rigor are used to arrive at margin of safety;
4. The objective is to achieve sustainable growth at a reasonable rate;
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5. Discipline is followed – Risks which are not understood are avoided. Price value gap is regularly monitored.
6. Focused portfolio with adequate stock diversification.
Asset Allocation
The Metis Equity Portfolio will seek to remain substantially invested in Equities or Equities
related instruments at all times. The cash in the portfolio may be invested in Liquid Funds or
Liquid Bees.
Benchmark
The Brands Equity portfolio will be benchmarked against the BSE 500 Index.
Performance of Strategy
Performance of the Metis Portfolio shall be measured at six monthly intervals and is shown
vis a vis the benchmark in the Disclosure Document filed by the Portfolio Manager with SEBI
every six months or upon occurring of any material change. Clients can also view the
performance details in the Risk Disclosure Document uploaded on www.karvycapital .com.
Securities
Investments will be made in stocks, mutual funds and Exchange Traded Funds (ETF).
The Portfolio will also use derivative instruments – Futures and Options – for hedging
and rebalancing of the portfolio.
Investment in equities will be valued on the closing price of that stock at NSE. In case
of investments in any stocks listed on BSE only, the same will be valued based on the
closing price of that stock in BSE. Investment in “Futures and Options”, used for
hedging, shall be valued at actual cash margins paid against F&O contracts, summed
with Mark to Market profit / loss computed on the basis of closing price of such
contracts.
Kindly refer Section III below for other features of this strategy.
Fees and Expenses: As defined in Section II below
For all strategies mentioned above, the Portfolio Manager shall be entitled to issue one or more series of the strategy. The portfolio manager may also decide to make periodic payouts to investors.
The fee portion below is common for all strategies whether Discretionary and Non
Discretionary Product
PLACEMENT FEE:
SECTION II: FEES AND EXPENSES PERTAINING TO THE PORTFOLIO STRATEGIES
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A Placement fee will be charged as a percentage of corpus over and above the fixed
management fee and performance fee. The placement fee shall also be charged each time
corpus is infused/ brought in by the client during the lifetime of the portfolio investment.
The placement fee shall be computed as a percentage of the initial corpus brought in by the
client and if subsequent to account opening, additional corpus brought in by such client
then it shall be computed as a percentage of the additional corpus brought in. The
Placement fee shall be deducted upfront from the Client’s portfolio. If client closes his
portfolio account prior to recovery of entire placement fee, the Portfolio Manager shall
deduct the balance Placement Fee from the proceeds payable to the client upon portfolio
closure.
PORTFOLIO MANAGEMENT FEE: The Portfolio Management fee(s) may be charged to
client(s) either as a fixed fee or as a fee linked to performance of the portfolio or a
combination of both. Details of the fixed / Performance fee which may be charged are as
follows:
FIXED MANAGEMENT FEE: Fee if charged as a Fixed Management Fee shall not exceed 3.00%
p.a. charged upto 0.75% at the end of every quarter / month [as may be agreed with clients]
on the daily average Net Asset Value of the Portfolio (inclusive of all securities and cash/bank
balance).
PERFORMANCE FEE: Fee if charged as a Performance fee shall not exceed 25% of
incremental gains beyond annualized hurdle rate not exceeding 0% on the basis of High
Water Mark Principle over the life of the investment. For existing clients, the performance
fee is being computed on a High Watermark Principle over the life of the Investment at the
end of every financial year on financial year basis. From 1st August, 2012, for new clients the
performance fees is being charged on completion of 12 months (anniversary basis) and not
financial year basis.
PREMATURE REDEMPTION CHARGES/ EXIT CHARGES: If the redemption is done prematurely
at the option of the client, the Portfolio Manager shall levy the Premature Redemption
Charges/ exit charges as may be agreed upon between the Portfolio Manager and the clients
when signing the Portfolio management Services Agreement.
Further, the below general costs and expenses shall be borne by the clients availing the
services of the portfolio manager:
Depository Participant fee
The charges relating to opening and operation of demat accounts, custody and transfer
charges for shares, bonds and units, dematerialization and rematerialization, pledge and
removal of pledge, etc. will be as per the actual charged by the Depository Participant.
Custodian fee
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The charges relating to custodian activities will be as per the actual charged by the
Custodian.
1. Registrar and transfer agent fee:
Charges payable to the Registrar and Share Transfer Agents in connection with
effecting transfer of any or all securities and bonds, units, etc. including stamp
charges, cost of affidavits, notary charges, postage/courier charges and other related
charges will be recovered on actual
2. Brokerage and transaction cost:
The Brokerage and other charges like Goods and Services Tax , Stamp duty, Security
Transaction
Tax, SEBI Fees, Bank charges, Turnover tax, and other charges (if any), as per the
rates existing from time to time, will be charged on actual.
3. Securities Lending Charges:
If utilized, the charges pertaining to lending of securities, costs associated with
transfer of securities connected with lending transfer operations, Depository
Participant Charges, Share Transfer Agent Charges, etc. would be recovered on
actual.
4. Certification Charges or Professional Charges:
Any charges payable for outsourced professional services like accounting, taxation,
auditing, and any legal services, notarizations, etc., incurred on behalf of the Client
by the Portfolio Manager, will be charged from the client on actual.
5. Fees, entry/exit loads and charges in respect of investment in mutual funds:
Mutual funds may be recovering expenses or management fees, entry/exit loads and
other incidental expenses along with services tax, if any, on such recoveries and such
fees, entry/exit loads and charges including services tax on such recoveries, as per
the relevant regulation shall be paid to the asset management company of these
Mutual Funds on the clients’ account. Such fees and charges are in addition to the
Portfolio Management fees described above.
6. Incidental Expenses
Charges in connection with day to day operations like courier charges incurred in
providing physical reports relating to client’s portfolio / welcome letter / account
statements/ other communication to clients, stamp duty, Goods and Services Tax,
postal, telegraphic expenses, opening and operation of bank and demat accounts or
any other out of pocket expenses incurred by the Portfolio Manager, on behalf of the
client, would be recovered from the client. All incidental and ancillary expenses not
covered above but incurred by the Portfolio Manager on behalf of the client would
be recovered from the client.
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SECTION III: COMMON FEATURES OF THE PORTFOLIO STRATEGIES {common features applicable to all strategies }
Minimum investment amount is Rs. 25 Lakhs.
Clients can at any time after opting for any Portfolio provide additional corpus in multiples of
one rupee to be added to the thePortfolio to be managed by the Portfolio Manager subject
to applicable fees and charges levied by the Portfolio.
Liability of a client shall not exceed client’s investment with the portfolio manager.
The Portfolio Manager shall charge audit fees, custodial/ AMC charges and other
charges/costs, attributable to the Portfolio Management Services on actual.
Any charges payable for outsourced professional services like accounting, taxation, auditing,
and any legal services, notarizations, etc., incurred on behalf of the Client by the Portfolio
Manager, will be charged from the client on actual.
The Client may withdraw whole or part of the funds or securities from the portfolio account
by giving advance notice and the Portfolio Manager will endeavor to liquidate the securities
held in the strategy and return the funds or securities of the strategy, as the case may be, to
the client within reasonable time. In case the Portfolio Manager is for any reason unable to
sell the securities, the Client shall be obliged to accept the securities in the portfolio.
The Portfolio Manager will provide periodical reports as required under the regulations at
the communication address provided by the client at time of account opening. In case
Portfolio Manager is unable to provide the periodic reports in physical copy, the same shall
be provided to clients via email at the email id registered by clients at time of account
opening.
The portfolio account will be audited by the Independent Chartered Accountant every year
and copy of the Certificate issued by the Chartered Accountant will be given to the Client.
A. Non – Discretionary Portfolio Management Services
The following are illustrative, but not exhaustive, investment strategies which would be
available for client availing Non-Discretionary Portfolio Management Services.
1. Equity oriented strategies
These strategies would include equity focused strategies with the flexibility to invest
across Equity instruments available and across market capitalizations. The strategy
may invest in non convertible debentures with performance linked to an equity
instrument. Specific details of the portfolio would depend on the requirement of the
client.
2. Debt Focused strategies
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These strategies would include debt focused strategies with the flexibility to invest
across Debt instruments available including mutual funds, bonds and non convertible
debentures. The strategy may also invest in debentures providing capital protection
and offering debt like returns which may have an equity index, basket of stocks or
commodities as the underlying. Specific details of the portfolio would depend on the
requirement of the client.
3. Multi Asset strategies
These strategies would include investments across Equity, debt, gold and other asset
classes which may be available through exchange traded products or mutual funds.
Non convertible debentures (other than equity or debt) will also be included here.
Specific details of the portfolio would depend on the requirement of the client.
GLOSSARY OF TERMS USED IN THE RISK DISCLOSURE DOCUMENT AND ANNEXURE A
Discretionary portfolio: A portfolio where the funds of each client are managed individually and independently by the fund manager in accordance with the needs of the client.
Non discretionary Portfolio: A portfolio where the funds are managed by the fund manager in accordance with the directions of the client. Hurdle rate: The rate over which profit sharing / performance related fees are usually charged by portfolio managers. This is not a fixed number and would be specified in the agreement signed with the client. High Water Mark Principle: As defined by SEBI, High Water Mark shall be the highest value that the portfolio/account has reached. Value of the portfolio for computation of high watermark shall be taken to be the value on the date when performance fees are charged. If client is being charged performance fees, The portfolio manager shall charge performance based fee only on increase in portfolio value in excess of the previously achieved high water mark Asset allocation: Asset allocation is an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investors risk tolerance, goals and investment time frame. Asset Classes: A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations. Asset classes include but are not limited to Equities, fixed-income and cash equivalents. Non convertible debentures: A debenture is a document that either creates a debt or acknowledges it, and it is a debt with or without collateral (without collateral debt will unsecured debt). Non-convertible debentures are regular debentures which cannot be converted into equity shares of the liable company. Investment vehicles: An investment vehicle is a product used by investors with the intention of having positive returns. Investment vehicles can be low-risk, such as certificates of deposit (CDs) or bonds, or can carry a greater degree of risk such as with stocks, options and futures. Alternate asset classes: Alternate asset class is a newer type of asset that was not traditionally considered to be a part of an investment portfolio. These include but would not be limited to Derivative instruments, Real Estate, Commodities (including Gold) etc. Structured Products: A market linked investment, is generally a pre-packaged investment strategy based on derivatives, such as a single security, a basket of securities, options, commodities, debt issuance etc. Over the counter products: OTC or off-exchange products are those where trading is done directly between two parties, without any supervision of an exchange. These are used primarily where customized products are required. Macaulay’s Duration: Macaulay’s Duration measures the time required to recover the present value
KARVY CAPITAL LTD.
Page 1
ANNEXURE B - Details of all settled and pending disputes against Karvy Capital Limited/ its directors/associates as on August 2019
There have been no Enquiry/investigation/disciplinary action/adjudication/prosecution/ any other action initiated/taken or penalty imposed pending against Karvy Capital (KCAP), its associate/s or any of its directors/shareholders/partners by SEBI/exchange(s)/clearing corporation(s)/clearing house or any other regulatory authority except as mentioned below:
A. DETAILS REGARDING ACTIONS INITIATED/TAKEN/ PENDING AGAINST KARVY STOCK BROKING LIMITED
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
(a) (b) (c) (d) (e)
1. SEBI vide order dated
26.05.2006,
directed, Karvy Stock
Broking Ltd. (KSBL),
not to act as a
depository
participant, passing
of final orders, except
for acting on the
instructions of
existing beneficial
owners ('BOs’). SEBI
also directed KSBL, as
a stock broker, not to
undertake any
proprietary trades in
- Subsequent to the enquiry
and hearing with the whole
time member, SEBI in its final
order dated June 22, 2007,
directed that KSBL as a DP is
prohibited from opening
new demat accounts till
December 31, 2007. SEBI
also passed an order that the
certificate of KSBL as a
broker be suspended for a
period of 3 months.
KSBL as a broker had filed an
appeal no 75 of 2007 on June
25, 2007. SAT had stayed the
(i) Subsequent to PAN being made
mandatory by regulators, the
Company has developed a
software application wherein the
PAN details provided by the
applicants are validated online
with the Income Tax website. Only
such applications where PAN
details are valid in all respects are
processed for opening BO
accounts. The Company has taken
permission from the depository for
such online validation.
(ii) The concurrent audit has been
strengthened by way of 100% audit
of account opening application
Nil
KARVY CAPITAL LTD.
Page 2
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
securities, either off-
market or on market,
passing of final
orders.
order on July 4, 2007.
KSBL as a DP had filed an
appeal no 111 of 2007 on
July 17, 2007. SAT had stayed
the order on August 8, 2007.
SAT in its final order dated
June 30, 2008 set aside the
impugned order dated June
22, 2007, remanding the
matter back to SEBI with a
direction to pass separate
orders against KSBL – as a
Broker as well as a DP with
regard to the violations
emanating from the enquiry
officer’s report.
The Whole Time Member
had granted a personal
hearing as per the order of
Hon’ble SAT, wherein
submissions to SEBI have
been made by the company.
forms by external agency with
regard to compliance and
fulfillment of the documents
required as per KYC norms.
Extensive training sessions to all
the DP front office employees has
been conducted educating them
on the scrutiny required to be
done while accepting account
opening application form
(iii) Front office personnel of some
of the branches have also been
nominated for NSDL / CDSL training
for the purpose of compliance of
NCFM / NCDO certification
requirement. Fortnightly review of
the Demat accounts opened with
the same address is undertaken by
a senior resource
(iv) No applications are accepted
and accounts are opened without
an “in-person” verification and re-
verification of original documents,
KARVY CAPITAL LTD.
Page 3
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
SEBI issued final order in
respect of KSBL – Depository
Participant on 28th January,
2014 and has in paragraph
20 such order clearly
concluded that KSBL –
Depository participant has
already undergone
prohibition from taking up
any new assignment for a
period of 18 months and 26
days and hence there need
not be any further penalty on
KSBL – Depository
Participant.
SEBI issued final order in
respect of KCPL – RTI on 3rd
February, 2014 and in such
order stated that since KCPL
has already undergone
prohibition from acting as
RTI for approximately 10
months no further penalty is
warranted.
required as a part of KYC, by an
employee of the Company.
Reporting of off-market
transactions submitted for
execution to the DP and
Compliance Head on a fortnightly
basis.
(v) The above corrective actions
taken by the Company have been
intimated to SEBI in our various
correspondences during the
process. An inspection has also
been conducted by SEBI during
October 2009 to review if the
procedures and processes adopted
are in order. There has been no
adverse observation by the
inspection team.
KARVY CAPITAL LTD.
Page 4
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
SEBI had passed order dated
14 March 2014 prohibiting
KSBL- Broker from taking up
any new assignment or
contract or launch a new
scheme (i.e., not to take new
clients/customers) for a
period of 6 months in respect
of its business as a stock
broker.
KSBL had preferred an appeal
before Hon’ble Securities
Appellate Tribunal (SAT)
against the order. Hon’ble
SAT, vide order dated 16
April 2014, in the matter of
Appeal No 66/2014 granted
a stay on SEBI’s order dated
14 March 2014. Further, SAT
vide order dated 21 January
2015 has set aside the SEBI’s
order dated 14 March 2014
and directed SEBI to pass
appropriate order after
KARVY CAPITAL LTD.
Page 5
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
hearing by the Whole Time
Member., Subsequently
hearing was held before the
WTM SEBI on 7th April, 2015.
SEBI issued final order dated
15th June, 2015 disposing off
the proceedings against KSBL
by directing it to not
undertake only new primary
market assignment including
acting as syndicate member
or providing syndication
services (procuring IPO
applications and bidding in
IPOs), directly or indirectly ,
in IPOs for a period of one
year. SEBI has also clarified
that this direction shall not
hinder the activities for
which KSBL was already
engaged for undertaking
primary market activities
before the date of the order.
W.e.f June 16, 2016 KSBL has
commenced to undertake
KARVY CAPITAL LTD.
Page 6
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
new primary market
assignments including acting
as a syndicate member or
providing syndication
services (procuring IPO
applications and bidding in
IPO’s).
2 In February 2007, SEBI had initiated proceedings under section 24 of the SEBI act, against the three directors of the company, viz. Mr. C. Parthasarathy, Mr. M. Yugandhar, Mr. M. S. Ramakrishna, and Karvy Stock Broking Limited which are pending before the additional chief metropolitan magistrate, Mumbai.
-- -- -- Pending
KARVY CAPITAL LTD.
Page 7
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
Arising from the above said investigation, SEBI has filed two separate complaints under section 190 of criminal procedure code r/w 68A & 621 of Companies Act-1956 against KSBL and three of its Directors, namely Mr C.Parthasarathy, Mr M.Yugandhar and Mr Ramakrishna before the Special Judge at Mumbai vide Case Nos: 66/2016 and 74/2016 before the SPecial Judge and the said complaints are pending before the said court.
KARVY CAPITAL LTD.
Page 8
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
3 Two cases - BS & FC (RC 3(E)/ 2006 and 4(E)/ 2006) under Sections 120 B r/w 420, 467, 468 & 471 of IPC, under Section 68(A) of the Companies Act 1956 and under Section 13(2) r/w 13 (1) (d) of the PC Act, 1988 were registered by CBI vide charge sheet dated September 29,2007 and October 30, 2007 in the matter of Yes Bank and IDFC Ltd. after arraying Karvy Stock Broking Limited, Karvy Computershare Pvt. Ltd and Karvy Consultants Ltd and other officers of these entities including Mr. C. Parthasarathy, as co-accused. The matter
-- -- -- Pending
KARVY CAPITAL LTD.
Page 9
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
is pending before the Hon’ble Special judge.
4 The Enforcement
Directorate, after
relying on the
investigations of CBI
and that of SEBI and
on the premise that
Section 467 of IPC
framed against the
co-accused
represents a
predicate offence
which is categorized
as a scheduled
offence under
Section 2(u) of the
Prevention of Money
Laundering Act-2002
(PMLA), has filed a
prosecution
-- -- -- Pending
KARVY CAPITAL LTD.
Page 10
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
complaint in April
2013 bearing
no.04/2013, in terms
of the provisions of
PMLA. The matter is
pending before The
Appellate Authority
PMLA New Delhi
5. Inspection
of Portfolio
Management services
business of Karvy
Stock Broking Limited
(KSBL) conducted in
2013-14.
Based on the findings of
inspection, the company
has received a show
cause notice as to why
adjudication
proceedings should not
be initiated against the
Company.
SEBI had vide show cause
notice dated November 24,
2014 initiated adjudication
proceedings against Karvy
Stock Broking Ltd (KSBL)
(Portfolio Manager). This
adjudication was initiated
subsequent to the inspection
of KSBL as a portfolio
manager in February 2014.
KSBL has responded to the
notice vide its letter dated
January 14th, 2015. KSBL has
also filed for settlement
(consent) in the matter vide
1. The PMS Operations team
actively ensures in
coordination with the
operations team at Hyderabad
that KYC details of clients who
opt for PMS are uploaded to
KRA
2. The PMS Operations team
routinely scrutinizes account
opening forms and any
difference in ink if observed
between signatures of client
and text written by client is
immediately escalated and the
NIL
KARVY CAPITAL LTD.
Page 11
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
its letter dated January 23,
2015. Hearing in the
adjudication matter was held
before the AO on June 29,
2015 wherein authorized
representatives of KSBL
appeared before the AO and
made submissions. Hearing
in the consent proceedings
was held on 5th January,
2017. KSBL has remitted an
amount of Rs 6.8 lakh
towards settlement of the
matter and the proceedings
have been closed.
form rejected for clarification
and confirmation by client
3. All teams are being repeatedly
sensitized to fact that the word
“scheme” is not to be used
with respect to PMS
documents
4. The PMS Product team is in the
process of introducing a risk
profiling tool.
KARVY CAPITAL LTD.
Page 12
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
6.
Inspection of Karvy
Stock Broking Limited
(KSBL) as a
Depository
Participant of NSDL
and CDSL conducted
for the period from
April 2010 to March
2013.
(i)SEBI advised to take due
care while billing the clients
and avoid discrepancies in
billing.
(ii) In this regard SEBI advised
to ensure the strict
Compliance of the provisions
of the SEBI Act, 1956,
Securities Contracts
(Regulation) Rules, 1957 and
the rules, Regulations, Bye-
laws, directives/circulars
issued by the depositories
from time to time.
(i)With reference to the
observations raised by the
inspection officials pertaining to
discrepancies in billing we submit
that necessary corrective action
has been taken to prevent
recurrence of such observations.
(ii)We ensure to follow strict
compliance of the provisions of
SEBI Act, 1956, Securities
Contracts (Regulation) Rules, 1957
and the rules, Regulations, Bye-
laws, directives/circulars issued by
the depositories from time to
time.
Nil
KARVY CAPITAL LTD.
Page 13
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
7. Inspection of Karvy
Stock Broking Limited
(KSBL) as a Broker
conducted in March
2013 by SEBI.
Instances of complaints
involving trade disputes
and instances involving
non-settlement of
funds/securities on
quarterly basis
observed.
Inadequacies in
maintenance of records
pertaining to delivery /
dispatch of contract
notes
Final observations for the
inspection have been
received. Administrative
warning has been issued by
SEBI.
Provided information on measures
such as centralized call
confirmation for loss making
customers, confirmation call for
dormant customers upon their
trade, awareness and counseling to
dealers etc
The detailed dispatch records
through Indian Post with proper
bar code for sample dates have
been provided.
Nil
8 Inspection of Karvy
Stock Broking Ltd
(KSBL) as a Broker
conducted in March
2015 by SEBI
KSBL not adhered to the
guidelines prescribed in
SEBI Master Circular
dated December 31,
2010 with respect to the
categorization of clients
based on risk.
SEBI has advised to take
necessary corrective action
to ensure non-recurrence of
the observations
Provided information on measures
such as centralized call
confirmation for loss making
customers, confirmation call for
dormant customers upon their
trade, awareness and counseling to
dealers etc
Few NRI clients were not classified
as high risk and income ranges
NIL
KARVY CAPITAL LTD.
Page 14
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
Instances of investor
complaints of
unauthorized trading by
stock broker were
observed and some of
such complaints had
been redressed with
decisions of stock broker
to repay/ restore the
disputed claims on favor
of clients, by IGRP
were inadvertently captured lesser
than actual income range for few
clients
The errors have been since
rectified and necessary steps taken
to prevent non-recurrence of the
observations.
9 Writ petition filed by
KSBL w.r.t release of
arbitration award
amounts to investors
in the absence of
stay orders. KSBL had
challenged the vires
of Clause 9.3 (c) of
SEBI Circular dated
August 11, 2010
SEBI and NSE have made
submissions as
respondents in this
matter.
The writ petition is
pending disposal before
the Bombay High Court
NA NA NIL
KARVY CAPITAL LTD.
Page 15
Sl.no. Details of the case SEBI/Exchange observation(s)
SEBI Action Corrective steps taken by Company towards observations
made by SEBI
Pending actions,
if any
10 Inspection of KSBL
carried out by NSE in
October 2016
Corporate Guarantees
were extended by KSBL
to subsidiaries which
were not engaged in the
business of securities
Loans given to
subsidiaries not reduced
from networth
Penalty of Rs 25 lakh levied More than 90% of the corporate
guarantees extended to
subsidiaries has been closed.
Loans given to subsidiaries have
been recovered and going forward
would be reduced from the net
worth
NIL
B. Details of action initiated / taken/pending, i f any, by SEBI against Karvy Data Management Services Limited., Group Company.
Sl.no.
Details of the case SEBI Observations SEBI Action Corrective steps taken by Company towards observations made by SEBI
Pending actions, if any
(a) (b) (c) (d) (e)
KARVY CAPITAL LTD.
Page 16
1 SEBI had conducted
inspection of KDMSL
KRA activity in
February 2016
Deficiencies in complaint
handling mechanism
Deficiencies in scanned
documents
System audit done
calendar year wise
instead of financial year
Warning letter dated January
23, 2017 issued by SEBI for
the deficiencies observed
Complaints handling mechanism.
Help desk team has been set up to
attend complaints from investors
and intermediaries. Separate email
ID has been created to handle
grievances.
Deficiencies in scanned
documents.
KYC documents are scanned and
uploaded by intermediaries
against KYC data uploaded to
KARVY KRA for registration.
Incomplete documents are not
rejected while processing and
discrepancies in documents are
brought to the notice of the
concerned intermediary for
rectification.
System audit was done calendar
year wise instead of financial year
wise.
Periodicity of system audit has
been changed from calendar year
to financial year.
NIL
KARVY CAPITAL LTD.
Page 17
C. Details of action initiated / taken/pending, i f any, by SEBI against Karvy Comtrade Limited., Group Company.
Sl.no.
Details of the case MCX/NCDEX/SEBI Audit observation(s)
MCX/NCDEX/SEBI Action Corrective steps taken by Company towards observations made by MCX/SEBI
Pending actions, if any
(a) (b) (c) (d) (e)
KARVY CAPITAL LTD.
Page 18
Sl.no.
Details of the case MCX/NCDEX/SEBI Audit observation(s)
MCX/NCDEX/SEBI Action Corrective steps taken by Company towards observations made by MCX/SEBI
Pending actions, if any
(a) (b) (c) (d) (e)
1 On the basis of the observations reported in the PwC Audit report, the FMC had directed that a special forensic audit be conducted for the trades done by Indian Bullion Markets Association (IBMA) through the captioned Member. Accordingly, the special forensic audit was conducted by the Exchange through M/s. Borkar & Muzumdar, Chartered Accountants. Show cause notice dated August 28, 2015 enclosing therewith the audit report was issued by MCX.
Wash Trades/Cross Deals
in illiquid contracts
On the basis of the reporting
in the forensic audit report
and the personal hearing
given to the Member before
the Disciplinary Action
Committee Meeting held on
September 28, 2015, the
Committee decided that a
total penalty of Rs. 21,73,539
+ Advice (plus applicable
service tax) be levied upon
the Member. Accordingly,
the same was levied by the
Exchange and recovered
1. Blocking of contracts which
are illiquid in nature.
2. Creating awareness
amongst clients , branch
officials and authorised
persons/sub-brokers about
illiquid contracts and cross
deals.
3. Based on communication
received from the
Exchanges w.r.t dealings of
particular client, adequate
explanation is sought from
the clients and the trading
of the client in that
contract is blocked if felt
necessary.
NIL
KARVY CAPITAL LTD.
Page 19
Sl.no.
Details of the case MCX/NCDEX/SEBI Audit observation(s)
MCX/NCDEX/SEBI Action Corrective steps taken by Company towards observations made by MCX/SEBI
Pending actions, if any
(a) (b) (c) (d) (e)
2 SEBI had inspected KCTL in the month of February 2017
Bank balances in client
bank account not
commensurate with the
credit balances as per
back office
MCX vide their letter dated
21st September, 2018 levied
a penalty of Rs 15.85 lakh on
KCTL
Necessary corrective action has
been taken to ensure that the
balances are in sync.
NIL
KARVY CAPITAL LTD.
Page 20
Sl.no.
Details of the case MCX/NCDEX/SEBI Audit observation(s)
MCX/NCDEX/SEBI Action Corrective steps taken by Company towards observations made by MCX/SEBI
Pending actions, if any
(a) (b) (c) (d) (e)
3 For transactions by certain clients in the contracts of Guar seed and Guar Gum during the period October 2011 to March 2012 NCDEX has issued show cause notice to KCTL in August 2018
The transactions carried
out by the clients and
their related entities
through other brokers
were violative of open
interest limits and
market wide position
limits
NCDEX has proposed to levy
a monetary penalty.
The observations in the show
cause notice have been challenged
by KCTL vide their reply dated 5th
September, 2018 and have asked
for a personal hearing.
PENDING
KARVY CAPITAL LTD.
Page 21
Sl.no.
Details of the case MCX/NCDEX/SEBI Audit observation(s)
MCX/NCDEX/SEBI Action Corrective steps taken by Company towards observations made by MCX/SEBI
Pending actions, if any
(a) (b) (c) (d) (e)
4 On 27-09-2018, KCTL along with other 300 NSEL members had received a Show Cause notice (SCN) for the paired contracts traded on NSEL platform.
SEBI had alleged that the
members had facilitated
its clients in entering into
paired contracts which is
a violation of the certain
guidelines which
impacted the fit and
proper criteria of KCTL as
a Broker. KCTL has been
granted time till 9th
November, 2018 for
filing its reply
SEBI have called for
explanation of KCTL
Vide letter dated November 6,
2018 KCTL has sent a detailed
reply refuting the allegations in the
show cause notice. Matter is
pending
Pending
KARVY CAPITAL LTD.
Page 22
D. Details of action initiated / taken/pending, i f any, by SEBI against Karvy Financial Services Limited., Group Company.
Sl.no. Details of the case
SEBI observation(s) SEBI Action Corrective steps taken by Company towards observations made by SEBI
Pending actions, if any
(a) (b) (c) (d) (e)
1.
Proceedings
under section
11B and
adjudication
proceedings
have been
initiated by SEBI
against Karvy
Financial Services
Ltd (KFSL) in the
matter of M/s
Regaliaa Realty
Ltd
In February 2012 KFSL
through invocation of
pledge, got 55% of the
shares of M/s Regaliaa
Realty Ltd transferred in
its name. SEBI observed
that KFSL had not sought
exemption prior to
invoking the pledge.
Adjudication proceedings an
d proceedings under section
11B initiated. Hearing before
Whole Time Member (WTM)
held. WTM has passed order
dated 27th October, 2016
directing KFSL to make open
offer. KFSL has preferred an
appeal before the Securities
Appellate Tribunal.Vide
order dated 26th April, 218
SAT has dismissed the appeal
filed by KFSL. KFSL is in the
process of complying with
the order dated 27th
October, 2016 passed by the
SEBI WTM.
KFSL would seek prior exemption
going forward.
NIL