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December 2, 2002 | 0930 IST
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Assets of UTI-I may be pooled

P Vaidyanathan Iyer in New Delhi

To better leverage the equity holdings of UTI-I, the government may consider pooling together assets worth about Rs 25,000 crore (Rs 250 billion) under its various schemes.

This will bolster UTI-I's position while entering into negotiated deals or tendering open market bids in the future, senior government officials told Business Standard.

Officials said since the government has decided to retain UTI-I with itself and since the liabilities of UTI-I had been fenced, pooling the assets would not pose a big problem.

According to officials, an opinion from the Securities and Exchange Board of India may be sought for pooling the assets.

This is, however, not necessary since the government has committed itself to meeting all its obligations annually to cover any deficit in UTI-I, they said.

UTI-I comprises the flagship US-64, 25 assured return schemes and the development reserve fund of the Unit Trust of India.

The market value of assets under US-64 alone is about Rs 10,637 crore (Rs 106.37 billion) as on October end, 2002. Of this, equity holdings have a market value of about Rs 6,381 crore (Rs 63.81 billion), government securities portfolio of about Rs 3,301 crore (Rs 33.01 billion) and corporate debt about Rs 955 crore (Rs 9.55 billion).

The assured return schemes of UTI-I comprise the Monthly Income Plans and Institutional Investors Special Fund Unit Schemes. The equity component in most of the schemes is significant.

For example, the equity and equity related component in MIP 98, an ARS, at Rs 195 crore (Rs 1.95 billion) is almost a quarter of the total assets under management of the scheme as on October 31, 2002.

As on July 1, 2002, the shortfall projected at maturity of the scheme was Rs 437 crore (Rs 4.37 billion).

In case of IISFUS 98, another assured return scheme of UTI-I, equity assets at Rs 153 crore (Rs 1.53 billion) as on October 31, 2002 account for over 24 per cent of the total assets under management at Rs 630 crore (Rs 6.3 billion). Most of the ARS have an equity component of about 20-25 per cent in their total assets under management.

While the present value of shortfall at maturity of all the assured return schemes was estimated at Rs 13,739 crore (Rs 137.39 billion) by the finance ministry, the projected shortfall at maturity was pegged at Rs 24,045 crore (Rs 240.45 billion).

These included a dozen full term assurance schemes for five years (including MIP97 IV which matured on October 31, 2002), five schemes with capital assured at maturity with annual dividend reset and four long term full assurance schemes.

The government plans to reset interest rates of ARS to lower levels wherever feasible and at the same time explore foreclosure of some schemes if possible. This could help it reduce its obligations to the ARS.

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