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Corporates ready to buy back stocks from UTI

BS Markets Bureau

Corporates have started approaching Unit Trust of India with buyback proposals. This move follows the trust's tough stance of selling off the illiquid stocks of these companies.

UTI, which is the largest investor in stock market, manages 87 schemes and has investments in over 1,100 companies.

Shares of many of these are not actively traded. Of these 1,100 companies, barely 20 per cent are actively traded. In other words, the fund giant has a huge pile-up of illiquid stocks from which an exit is an onerous proposition.

Moreover, the trading volumes in some of these stocks are very low making it very difficult for the mutual fund giant to realise a good price. As part of his gameplan, UTI chairman M Damodaran wants the corporates to buy back these stocks at a negotiated price.

Otherwise, he has threatened to sell these stocks and in the process promoters of some of these companies may end up losing the management control.

"Some of the companies have responded to us. The corporates have started approaching us and discussing the nitty-gritty of the buyback of shares," Damodaran said.

"Stocks which are good and actively traded are the ones where we will make money as we go along, but at other end we have smaller companies which are not trading and they are not giving us any returns," he added.

The selling of these stocks will generate the much needed liquidity for the beleaguered UTI, which has seen heavy redemptions of its flagship US-64 scheme in April and May. Six of its schemes are set to come up for redemption in the next six months including two monthly income plans.

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