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UTI faces Rs 82.17 billion shortfall

Samata Dhawade & Rakesh Sharma in Mumbai

The Unit Trust of India needs a total Rs 82.17 billion to cover the current shortfall in assured return plans as on June 30, 2002.

This includes a sum of Rs 37.402 billion being the negative reserves in its 14 monthly income plans and Rs 44.764 billion to cover the negative returns in its US-64 scheme.

While the UTI is committed to paying out an assured rate of dividend in its MIP schemes, even the US-64 scheme has taken the shape of an assured returns scheme after it committed itself to a fixed repurchase price till May 2003.

The total tab for covering the negative reserves in the 14 MIPs and the US-64 scheme comes to Rs 82.166 billion as on June 30, 2002. The bill may change for the better or for worse in subsequent quarters depending on the state of the equity and debt markets.

Indeed, lower income from trading activities and a change in policies on the provision of non performing assets impacted the reserves during the year. Earlier, UTI had provided for NPAs as per banking and financial institutions norms.

A top UTI official explained, "The change in calculation of NPAs according to Sebi guidelines for mutual funds has led to the higher provisioning requirement by the Trust."

He said, "Most of the NPAs have been provided for and hence further big hits in the balance sheets are unlikely."

Of the 63 schemes for which UTI has published data for the half-year ended June 30, 2002, as many as 35 schemes have posted negative reserves, totalling Rs 122.03 billion. Of this, the 14 MIPs and US-64 alone account for 67 per cent.

The Unit Scheme 64's negative returns account for 37 per cent of aggregate negative reserves. And the 14 MIP schemes have almost doubled their negative reserves to Rs 37.40 billion this year from Rs 18.03 billion as on June 30, 2001.

The Children's Gift Growth Fund 86 is the second largest in terms of negative reserves, registered a increase of over 50 per cent in its negative reserves to Rs 24.67 billion as on June 2002.

Among the monthly income plans, the MIP 2000 scheme had the largest negative reserve of Rs 4.73 billion, almost 41 per cent higher than on June 30, 2001, followed by MIP 98 II with Rs 4.41 billion negative reserves.

The remaining 28 schemes had a modest Rs 28.49 billion in positive reserves. As a result, the 63 schemes had a cumulative reserve base of a negative Rs 93.55 billion as on June 30, 2002.

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