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July 3, 2001
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Money > Business Headlines > Report July 3, 2001 |
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UTI's decision leaves investors high & dryBS Bureau The Unit Trust of India's decision to freeze the sale and repurchase of US-64 units has left the small as well as the corporate investors stuck with their investments without any viable exit option. According to analysts, the price discovery mechanism of US 64 based on the demand and supply could batter the US 64 unit price to ridiculously low levels in the absence of any buyers in the huge market. "It could be anybody's guess where the unit price will hit," Dhirendra Kumar, CEO, Value Research said. "Given the track record of the fund in the last few years with dividends less than 15 per cent and the ambiguity surrounding the net asset value of the fund, the suspension of sale and repurchase can lead to distress sale," Kumar said. "This can even lead to a run on the scheme," he added. CK Goushal, financial advisor, HFCL, said that UTI's decision would affect corporate liquidity. But, he added, interest rates were low and banks and financial institutions were flush with funds. Several senior executives of different companies also forecast huge redemption pressure after the freeze was lifted. They termed the decision not to sell or repurchase US-64 units as "unfortunate". Global Tele-Systems chief financial officer Vijay Paranjpe said that it would be difficult to regain investor confidence in the immediate future. Apart from corporates, retail investors would not make huge investments in US-64 unless UTI offered attractive incentives, he said. But many large corporates do not have major investments in US-64. Many have been parking their funds in a number of instruments, and so the impact for them could be marginal. Others had reduced their exposure in the last six months. Companies like Bombay Dyeing, Mahindra & Mahindra, Raymond, Videocon International, BSES and Marico Industries said they did not have any exposure in US-64, though one in this list which did not want to be identified said it had an investment of Rs 3 billion but had sold units before UTI's latest announcement. Several others, including Associated Cement Companies, Larsen & Toubro and the RPG group, declined to comment on the issue. Powered by YOU MAY ALSO WANT TO READ:
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