Escape hatch for US-64 investors
Software defies industry slump
Khataus to raise stake in Varun Shipping

Mumbai, July 15: 
With a new chairman � M. Damodaran � at the helm, Unit Trust of India today announced the much awaited exit plan for US-64 investors. Unit holders will be allowed to redeem units beginning August 1.

In a hurriedly convened board meeting on a Sunday evening, the board authorised Damodaran to take charge and announced a Rs 3,000 crore plan that aims to pave the way for migration of the scheme from administered pricing to a net asset value-based one.

UTI said all investors owning units in US-64 as of June 30, 2001, will be allowed to redeem up to 3,000 units from next month to May 31, 2003, beginning with a price of Rs 10 or the prevailing net asset value (NAV) of the scheme, whichever is higher.

The repurchase price of Rs 10 for August will go up 10 paise every month till May 2003, when it will touch Rs 12.

�Our expectation is this graded system will persuade the small investor to stay invested for a long term,� the new UTI chief said.

If there is any deficit between the NAV and the repurchase price set out, it will be bridged to prevent a dilution of the scheme�s NAV.

New sales and unlimited repurchases in the scheme will open at NAV-based prices from January 1, 2002.

Moreover, UTI will not sell its holdings on the bourses to meet the need for funds.

Executive director B. G. Daga said �There is adequate liquidity with UTI to manage the repurchases and we do not see a flood of repurchases immediately.� UTI will also look at a strategic sale of its equity holdings in companies, he said, adding, they were in talks with financial institutions including the Life Insurance Corporation.

Industry circles call the exit package a �masterstroke� and said the move will reassure small investors to ultimately remain with the scheme. Besides coming as a much-needed confidence booster for the markets, the mutual fund industry and investors, the exit package is expected to restore some of the faith in the country�s largest mutual fund.

Baptism by fire

An IAS officer, Damodaran, who was earlier joint secretary in the banking division of the finance ministry, and officer on special duty in the Reserve Bank of India prior to this assignment, has been appointed for a period of one year initially, senior finance ministry official J. Bhagwati said.

He takes over from K. G. Vassal, who was appointed acting chairman after P. S. Subramanyam was asked to quit on July 4 following the suspension of sales and repurchases of US-64 units for six months.

Damodaran was the chief architect of the bailout package for the three weak banks � Uco, United Bank and Indian Bank.

His appointment comes days before the Y. H. Malegam committee on the corporate positioning of UTI, submits its report.


New Delhi, July 15: 
The slowdown has roiled industry badly over the past year but a couple of sectors are beginning to shine through. Software services, LPG and housing finance are the stars who figure prominently in the latest Ascon industry survey with growth rates of 40 per cent above. A second diverse group comprising paints, motorcycles and energy meters is just beginning to break through.

The stagnation in industry is evident from the CII report that shows 81 of the 117 industries covered by the survey registered low or negative year-on-year growth (i.e less than 10 per cent) in production in April-June 2001. Twenty five industries clocked high growth of between 10-20 per cent. Only nine industries achieved excellent growth with more than 20 per cent increase in production. The steep fall in demand has sent the automobile industry into a low gear. Medium and heavy commercial vehicles and motorcycles were the only two segments in the category that recorded double digit growth (16 per cent and 17 per cent respectively). Car production grew negative at 8 per cent and scooter production recorded a negative 18 per cent growth.

While washing machines registered a negative growth of 5 per cent, refrigerator category grew by 0.2 per cent. Air-conditioners recorded a 15 per cent growth down from last year�s robust 35 per cent growth.

The consumer electronics segment presented a mixed picture: VCRs and VCPs recorded 10 per cent growth but colour TVs (-10 per cent) and black and white TVs (-25 per cent ) turned in a dismal performance. The report projects 10 per cent growth for the colour TV segment over the next six months. However, the forecast remains bleak for black and white TVs.

In the basic goods category, the situation was pretty stark with only LPG and sponge iron showing any signs of sprightliness. With very little improvement in production of aluminium, cement, fertiliser, pig iron and refineries, the industry has spiralled downward compared with April-June 2000.

The production of auto components slipped from 10 per cent in April-June 2000 to minus 1 per cent in April-June 2001. In the case of electronic components, the production of colour picture tubes is more or less stable at 12.5 per cent as compared with 13 per cent last year.


New Delhi, July 15: 
The Khatau family is strengthening its hold over Varun Shipping. The company is issuing 36.26 lakh optionally fully convertible warrants of Rs 13.70 each aggregating Rs 4.96 crore to promoter group company Concord Holdings Private Ltd.

The Khataus, who have a 36.55 per cent stake in the company, will hold 42.32 per cent of the equity after the conversion of the warrants into an equal number of shares at a face value of Rs 10 each that will take place within 18 months of the issue. At present, the financial institutions hold 17.62 per cent of the Rs 36.26 crore equity of VSCL. Domestic investors have the single largest stake of 42.52 per cent in the company.

VSCL, which is slated to convene its 30th annual general meeting on Wednesday, is floating the issue to raise additional funds to expand its shipping carrier fleet by inducting two to three more vessels this fiscal, sources reveal.


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