Taurus Mutual Fund has suspended sales in two of its schemes, Starshare and Discovery, to confine the sharing of extraordinary profits arising out of re-valuation of NDTV shares, which it has been holding for years, among existing unitholders.
The re-valuation of shares is likely to add 18 paise and 45 paise, respectively, to the net asset values (NAVs) of Starshare and Discovery, assuming that their investor base stands at last-disclosed unit capital of Rs 71.13 crore (Rs 711.3 million) and Rs 29.08 crore (Rs 290.8 million) [as on September 30, 2003] and that the NDTV's issue price settles down at the Rs 70.
Market players say the fund has already attracted significant inflows over the last few weeks as savvy banks and brokers have advised their clients to buy units considering the guaranteed-gain potential.
However, the latest assets under management figures are not available. Considering there were new inflows, the gains per unit could be lower than the figure projected above.
Taurus Mutual Fund has closed the sales of these two schemes for a week (April 19-28). Sales will resume on April 29, 2004, when the final prices of NDTV shares, to be determined by the book-building process, will be made known.
On that day, the NAVs of the two Taurus schemes will reflect the market valuation of NDTV based on the actual price determined through book building. Taurus picked NDTV shares in a private placement deal in mid-1990s when NDTV was aggressively pushing for a public flotation.
As on September 30, 2003, the two schemes of Taurus held 1,25,000 shares each with a face value Rs 10.
These shares were valued at Rs 71 per share. However, since the face value of NDTV has been brought down to Rs 4, and the IPO price band is Rs 63-70, the fund is already sitting on huge unrealised gains.
Analysts say that there could be further gains, when NDTV shares make a debut on the bourses as the listing price will most likely be at a premium to the offer price. If the shares list at Rs 100, it will add another 13 paise and 32 paise to the respective NAVs of Starshare and Discovery schemes. Again, the gains could be lower in case there is further inflows into the fund.
Morgan Stanley Growth Fund will also be a beneficiary of the NDTV public offer and the listing as it held 1,48,100 shares at a face value Rs 10 and valued at Rs 1.16 crore (Rs 11.6 million) as on December 31, 2003. This translates to 3,70,250 shares at the face value Rs 4 valued at Rs 31 per share. The windfall expected in MSGF units will be reflected in its NAV and market price as it is a closed-end fund.
