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Nilanjan Dey

This year's crop of annual reports, currently being sent to shareholders all over the country, again underline the extensive use of mutual funds by corporates. Their performance statements, in fact, are replete with indications that funds are being preferred over certain other forms of investments by treasury managers.

Many corporates need to invest round the year as part of their operational strategy. Seasonal patterns are also quite evident. There is a huge organised effort on the part of the fund houses to tap these investors, an effort that is supported ably by distributors. The idea is to meet unique requirements in terms of liquidity, safety and returns.

This widespread use of funds by companies is of relatively new origin. Some 10 years ago, there were not so many funds to choose from, the choice then being limited to Unit Trust of India and a handful of other public-sector players. The mutual fund industry in this country has come a long way ever since private organisations were allowed to enter the fray. Over time, investment styles followed by wholesale investors have matured.

Finance managers typically look at funds as pass-through vehicles. More often than not, their involvement is temporary, especially so if it is with liquid and short-term funds. But companies, large and small, do consider them as part of their overall investment programmes.

Some corporate groups have turned out as promoters of asset management outfits as well. The Tatas and the Birlas are the two best examples of this; Tata MF and Birla MF operate in their distinctive ways and both have tie-ups with prominent overseas funds. There are other instances as well. Names such as Reliance, Sundaram and Cholamandalam can be mentioned.

Take the case of Reliance Industries Ltd, one of the country's largest companies and a stock market heavyweight. Its balance sheet for 2002-03 is awash with evidence that investments have been made in a number of funds managed by Reliance Capital MF. As on March 31, 2003, RIL had exposure to the liquid, short-term and monthly income plans.

The company's `other investments in units quoted' related to US 64. Incidentally, there was also a disposal of SBI MF's Magnum Multiplier Plus 1993. In fact, as an explanatory note suggested, 1.59 lakh units of the scheme were written off owing to bad delivery.

Some funds have recently tried to accord a special welcome to corporate and other wholesale investors, courtesy institutional schemes that require very large investments. These options are by definition out of bounds for small, retail investors.

Several institutional products are available already, and a few more (such as one from SBI MF) are expected to be launched in future.

Bank-sponsored funds are perhaps best placed to introduce such schemes because of their proximity to corporate clients. In fact, even newer players such as HSBC Mutual Fund and Deutsche Bank Mutual Fund have come up with these products.

That brings us to a not-so-different area, more specifically IDBI-Principal's Trust Benefit Fund. This scheme is aimed at organisations such as charitable bodies and religious trusts. The scheme — its asset base looks quite small, Rs 21.54 crore as on April 30 — seeks to create an income-oriented portfolio keeping in view a "distinct class of investors with special needs". Its end-April allocations were mainly made towards g-secs and corporate debentures.

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