Search the Internet          Tips  Sites: Finance, Investment

Govt urges UTI not to go for distress sale

The government has asked Unit Trust of India not to go for a distress sale of investments to meet redemptions of its assured income schemes even as the UTI board on Thursday decided to bifurcate US-64 into two schemes.

"We have asked UTI not to go for any distress sale of securities, including equity, and the Centre will provide assistance for any shortfall as well as for the amount, which could not be realised through sale of some securities," U K Sinha, joint secretary in the finance ministry said in Mumbai.

"The monthly income plan 1997- IV is maturing at the end of next month and we have issued a letter to UTI committing support to avoid distress sale and bridging the shortfall," he told newspersons after the board meeting.

The government would issue RBI saving bonds to the country's largest mutual fund player and the MIP 97-IV unit holders would be given an option to either collect relief bonds carrying seven per cent interest or cash, Sinha, who is also the Centre's nominee on UTI board, added.

UTI chairman M Damodaran said: "The support makes it clear that we are not going to come to the market to sell jewels at a song. The government will issue securities in excess of Rs 312 crore (Rs 3.12 billion) to meet the outgo requirements for MIP 97-IV."

On the restructuring of US-64, Sinha said it would be split into an administered price scheme to become a part of UTI-I and US 2002 - a net asset value based scheme.

Damodaran said UTI would approach Securities and Exchange Board of India to explain the rationale behind the division of US-64 and seek approval for US 2002.

Damodaran said the administered scheme would comprise assets before June 30, 2001 while US 2002 would have assets from the unit capital sold on and after January 1 2002.

The basis for dividing the assets of the scheme was calculation of NAV as the scheme's NAV-based sale and repurchases commenced from January, he added.

By current estimates, US 2002 would have a capital base of Rs 181 crore (Rs 1.81 billion) and it would be Sebi-compliant from day one, the UTI chief said.

Sinha said though UTI has been asked not to indulge in distress sale, any proceeds coming from block deals at better price should be ploughed back into the institution.

Damodaran said in the on-going month, gross sales of all schemes have exceeded the redemptions and UTI would end September with a net inflow.

UTI has evolved a separate arrangement for recovery of non-performing assets, which would be transferred to a different fund and proceeds would be used to repay investors of specific schemes, he said.

On August 31, the government had cleared an assistance package worth Rs 14,600 crore (Rs 146 billion) for UTI to meet any shortfall for US-64 and assured return schemes.

Meanwhile, UTI has also declared a 10 per cent dividend for Mastershare 86, whose NAV as on September 18 stood at Rs 11.36 per unit.

The institution has also declared a dividend of Rs 2.50 per unit (face value Rs 100) for Charitable and Religious Trusts and Registered Societies (CRTS 81) scheme.

ALSO READ:
The UTI Crisis
More Money Headlines