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UTI faces Rs 58-billion redemptions this year

N Mahalakshmi

The Unit Trust of India faces Rs 58 billion of redemptions this year, as 10 close-ended schemes are set to mature in the year. This is almost 11.22 per cent of its total asset base as at the end of November 2001.

These schemes include the assured return schemes like the Monthly Income Plans, the Institutional Investor's Special Fund Unit Scheme targeted at institutions and high net worth individuals, and the Master Equity Plan, which are equity-linked savings schemes.

Indeed, the massive success of the MIPs, which allowed UTI to raise unprecedented amounts of money, is now turning out to be its biggest millstone, as the MIPs maturing this year have assets of Rs 49.95 billion under management.

For UTI, this means two things: the loss of asset base (and market share) when the close ended schemes mature and the spectre of having to liquidate Rs 60 billion-plus assets to raise cash. Bulk sales of this order will, perhaps, depress the market and impact the valuations of the UTI's surviving schemes.

As on November 2001, UTI had total assets of Rs 516.66 billion under its management, with a marketshare of 51.74 per cent in the domestic mutual fund industry. In the last two years alone, UTI has lost 20 per cent of its market share to the fast growing private sector funds. In November 1999, the Trust had assets totalling Rs 658.67 billion out of the industry total of Rs 923.05 billion.

The largest fund house still serves 41.8 million investor accounts under 85 schemes at present.

The Trust has witnessed a rapid fall in its assets as it has not been able to make up by way of fresh collections for the large redemptions in many of its closed-ended schemes.

For instance, last year three MIPs with a corpus of close to Rs 18 billion were redeemed but new schemes hardly witnessed any growth in assets.

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