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UTI meet to take up small investors' cause

Ashok Jainani

MUMBAI, July 5

THE Unit Trust of India (UTI) will work out possible alternatives to provide liquidity to investors, particularly small individuals, in its largest scheme, Unit Scheme-1964 (US-64). The proposals may include partial liquidity in terms of restricted repur chase facility to individuals as opposed to corporate investors.

The board of trustees of UTI is expected to meet tomorrow to discuss the situation arising out of its earlier decision of July 2 freezing sale/repurchase under US-64 up to December and subsequent suggestions received from the Ministry of Finance in this regard.

The UTI acting Chairman, Mr Krishan Gopal Vassal, said that restoring investors' trust and confidence in UTI was his immediate task and any proposal framed to meet this end will be in consultation with the Ministry.

At their meeting on Wednesday, Ministry officials had expressed the desire that UTI should find out some way to provide exit to small unitholders who may need funds for commitments, senior UTI officials said.

In this connection, the Ministry expected that UTI should work out some propositions taking into consideration all factors and discuss with the Government within a period of two weeks. The proposals would also consider transferring UTI's real estate hold ings in US-64, estimated around Rs 876 crore, to a separate scheme to bring cash into US-64.

UTI will work on how soon it can provide liquidity to small investors. There were apprehensions that over two crore investors will be affected by UTI's decision to freeze sale/repurchase under US-64. UTI sources said that the number is not that large. US -64 has about two crore unitholding accounts but not that many investors as many investors have multiple folios. Actual investors in US-64 may not be more than 40-45 lakh, sources said.

UTI officials said that the decision to freeze sales/repurchase under US-64 was taken after considering liquidity conditions in the markets. Equities have shown wild fluctuations and some bluechips have lost substantial ground over the last few weeks.

For example, according to recent data, UTI's average cost for RIL, RPL, HLL is Rs 138.79, Rs 11.28 and Rs 63.17 respectively. And that of Century and Bajaj Auto is Rs 294.26 and Rs 521.21. It will be impractical for UTI in the current scenario to book p rofits in some scrips and book losses in others. ``Both could result in a zero-sum game. No mutual fund takes this kind of suicidal decision,'' sources said.