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UTI picked Rs 1.66 billion fresh debt of firms tagged NPAs

George Smith Alexander

The Unit Trust of India made fresh investments of Rs 1.66 billion in companies where existing investments were classified as non-performing assets.

The Tarapore Committee, which had made a random check on the investments in debt instruments by the UTI, noted that in eight cases the mutual fund had taken fresh exposures in companies which had already defaulted on payment.

In seven of these companies -- including Malvika Steel, Usha Ispat, SJK Steel Corp, Prag Bosimi Synthetics, SIV Industries, and SVC Superchem -- the investments were sanctioned by the executive committee.

UTI made additional investments of Rs 710 million in unrated non-convertible debentures of Malvika Steel on November 11, 1999.

This investment was made even as the UTI had on June 30,1999, made a provision of Rs 518.6 million against the total cost of Rs 2.06 billion.

The UTI had, as on June 30, 2001, made a provision of Rs 1.69 billion against the total cost of Rs 2.89 billion. An investment of Rs 121.3 million was made by UTI in Usha Ispat in unrated NCDs and the amount was disbursed on June 26, 2000.

However, as on June 30, 1999 UTI made a provision of Rs 276 million against the total cost of Rs 921.9 million.

As on June 30, 2001, UTI made a provision of Rs 1.27 billion -- Rs 270.1 million for the interest and Rs 996 million for investments.

These provisions were made against a total cost of Rs 1.23 billion.

The Tarapore Committee has also observed that certain investments had gone into default within a short period of their sanction. This the report stated "is indicative of possible deficiencies in the investment taking process".

The total investments by UTI in such companies according to the committee stood at Rs 4.51 billion between 1999 to early 2001.

Some of these companies where the investments had become NPAs soon after sanctioning included Balaji Distilleries, Welspun India, Welspun Syntex, and Deepak Fertilisers and Petrochemicals.

Also certain investments in debt instruments were made in companies which had earlier been classified as NPAs as on June 30,1999.

These accounts did not figure as NPAs as on June 30, 2000, or appeared with reduced provision. However, they re-appeared in the next year as an NPA as on June 30,2001. The committee has said that these cases "are perhaps indicative of the practice of evergreening."

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