| Damodaran: Keeping the bears at bay
Mumbai, Sept. 19: The government has told the Unit Trust of India (UTI) not to sell the stocks it holds as investments at poor prices to repay investors, promising it would come to the rescue with tax-saving securities.
The assurance will help all assured return schemes (including US-64), but the immediate beneficiary will be the Monthly Income Plan (MIP) 1997-IV — maturing next month — whose investors can now choose between cash or tax-saving relief bonds with a 7 per cent interest.
Talking to reporters after the UTI board meeting here today, joint secretary (capital markets) in the ministry of finance, U. K. Sinha, said the government has told the Trust that its equity holding should not be hawked unless it is offered a “good value” for the shares.
“Wherever there is large amount of retail holding, it should not be sold without a value addition and getting the right price,” he said. He made it clear that UTI has been given the freedom to offload its stocks and debt through strategic sales and private placements.
To the extent that sale of shares and securities do not raise enough money, the government will chip in with money. “The Centre will provide assistance for any shortfall as well as for the amount, which could not be realised through sale of some securities,” Sinha added.
The ministry has decided to hand the mutual fund major tax-saving RBI bonds. MIP 97-IV unit-holders can opt for bonds or cash. Figures released at the end of August show the government will have to issue securities worth more than Rs 312 crore to help UTI repay.
UTI chairman M. Damodaran said the support extended by the Centre was enough to keep his organisation from selling its holdings “for a song”. He made it clear that no government nod was needed for the sales.
Today’s meeting led to a decision to divide US-64 into an administered price scheme — which would be part of UTI-I — and a net asset value-based (NAV) plan.
Earlier this month, the UTI chief had hinted at the carve-up. Under it, the assured return part would be transferred to UTI-I, while units of US-64 sold after January 1, 2002 would be put under a new scheme that would be traded in the market. The division of assets between the two schemes would be done proportionately. Estimates put the capital base of US-2002, which would be Sebi-compliant from start, at Rs 181 crore.
Meanwhile, UTI’s gross sales have outmatched redemptions, and there are signs September will end with a net inflow. A 10 per cent dividend has been declared for Mastershare 86, whose NAV as on September 18 stood at Rs 11.36 per unit.