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Trust has faith in the leader

Calcutta, July 9: UTI Mutual Fund — the new avatar of Unit Trust of India — turned out to be the sole domestic institution that sees Maruti Udyog going a long way.

UTI Mutual Fund has scooped up around 18 lakh shares of the company from its initial public offering (IPO), which is just 8 per cent of what it had bid for.

Merchant bankers dealing with the IPO said UTI Mutual Fund was allotted the biggest block of shares in the IPO. Other domestic institutions were not, however, bullish on the issue.

Even Life Insurance Corporation of India, which is one of the biggest investors in the Indian equity market, bid below the cut-off — or the minimum allotment — price of Rs 125.

A. K. Sridhar, UTI Mutual Fund’s chief investment officer, said: “We had bid for over 2 crore shares. We are bullish on the automobile sector as a whole, and feel that the small car segment should continue to grow. Maruti should continue to be a leader in the passenger car market, thanks to its efficiency.”

The dominant view among institutional investors in India was that the issue was slightly high-priced. Sridhar, however, said: “Not only were we comfortable with the allotment price, we are not sellers even at the current market price — our price target for the stock is much higher.”

Domestic institutions, including mutual funds, picked up a paltry 10 per cent of the 7.94 crore shares that were sold by the government, while foreign institutional investors (FIIs) cornered around 30 per cent of the issue.

Among FIIs, Government of Singapore Investment Corporation and Templeton picked up the highest number of shares. Around 50 FIIs, which includes Merrill Lynch and Morgan Stanley, were allotted shares of the country’s largest passenger car company.

Sixty per cent of the issue was allotted to retail investors — 15 per cent to people who bid for 1,100 shares or more, and the balance 45 per cent, to investors who bid for up to 1,000 shares. The government decided to allot more shares to retail investors to broaden the shareholder base of the company.

Market observers say the higher allocation for retail investors augurs well for investors. “Retail investors having cornered as much as 60 per cent of the shares, there should not be any wild swings in the share price of Maruti,” said an analyst.

“Some retail investors have certainly booked profits on listing, but there’s still enough institutional interest in the stock to balance the selling pressure,” said another analyst.

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