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84% of US-64 debt portfolio is good paper

Samata Dhawade

Around 84 per cent of the debt investments made by Unit Trust of India's flagship US-64 scheme is in debt instruments rated as safe and government securities.

Of a total debt investments of Rs 52.21 billion as on December 31, 2001, money put into securities rated above triple-B stands at Rs 44.04 billion.

Debt investments account for 38.4 per cent of the scheme's total portfolio, meaning more than one-third of the total investment of US-64 is in investment-grade papers.

The money invested by the scheme in government securities forms the largest chunk at Rs 35.71 billion, accounting for 68.4 per cent of the debt portfolio.

Of this, Rs 35.70 billion is in government securities maturing in 2004. Non-convertible debentures form the second largest block, accounting for 24.2 per cent of the debt portfolio. Of these, 18 are AAA-rated NCDs.

Safety-rated debt instruments with ratings between AAA and BBB, account for 15.8 per cent (Rs 8.35 billion) of the total debt portfolio. Of this, triple A-rated papers account for 4.8 per cent, AA papers at 7.6 per cent, A at 2.1 per cent and BBB at 1.5 per cent.

US-64's investment in Jet Airways' AAA-rated NCDs is the single largest debt investment at Rs 788 million. Among investment in AAA-rated investments, it has Rs 430 million worth investments in Punjab National Bank's papers and Rs 290 million investments in National Aluminium.

Similarly, its Rs 690 million investment in Reliance Petroleum turned to be a good bet with an upward revision in the rating of the instrument from AA to AA+. In contrast, its Rs 805 million investment in the Industrial Development Bank of India's NCDs was downgraded from AAA to AA+.

The scheme has also allocated funds in eight preferential allotments, but it only adds up to a mere one per cent of the total debt holdings.

The only black spots has been investment in 24 default-rated (D-rated) instruments and 6 vulnerable to default (C-rated) instruments that account for 10 per cent of the debt portfolio.

The largest among them were the papers of Jindal Iron and Steel at Rs 2.87 billion and Jindal Vijaynagar Steel (Rs 670 million).

Essar Oil's Rs 190 million partly convertible debenture and Flex Industries Rs 180 million paper are some of the other bad investments of the scheme.

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