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`US-64 is now a baramasi product'

Ashok Jainani

MUMBAI, Sept. 6

THE Unit Scheme-1964 (US-64) continues to lead Unit Trust of India's (UTI) sales plans during the year as its management has set a sales target of over Rs. 20,000 crores under all schemes during the year.

The US-64 kitty continues to grow as the redemptions pressure is easing on one side and fresh sales are picking up on the other; US-64 appears to be a better bet in relation to comparable instruments, according to independent mutual funds distributors.

What is significant this July-August period is that net accretions, excluding dividend reinvestment plan (RIP) and net of redemptions under US-64, were Rs. 560 crores as compared to net outflow of Rs. 85 crores in the same period last year.

Once a seasonal product, UTI's flagship scheme, US-64, is turning out to be a `baramasi' as the Executive Director of UTI, Mr. B.G. Daga, likes to call - a product sold throughout the year.

This is reflected in the rate of sales stepping up in July-August unlike in the past when most of the sales came in July. July sales accounted for 69 per cent in 1998-99 and 52 per cent in 1997-98.

Fresh sales under US-64 during August 2000 have risen to Rs. 321 crores from Rs. 169 crores in the same period last year, an year-on-year growth of over 89 per cent.

Together with July-2000 sales of Rs. 500 crores and Rs. 700 crores under RIP, US-64 has collected over Rs. 1,509 crores (Rs. 1,069 crores), up 41 per cent.

As fresh sales keep growing under US-64, repurchases have reduced considerably. During July-August 2000, repurchases were Rs. 261 crores, down 50 per cent from Rs. 509 crores in the same period last year. During July-August, over 1.3 lakh new investors j oined US-64, indicating the response from the retail investors.

Total sales, including US-64, during July-August 2000 were Rs. 2,324 crores, up 16 per cent from over Rs. 2000 crores in the same period last year. Excluding US-64, the sales under all other schemes dropped 19 per cent to Rs. 795 crores from Rs. 981 cror es last year.

Total repurchases during two months period are down 44 per cent to Rs. 1,167 crores from Rs. 2,085 crores last year. The repurchases this year included over Rs. 423 crores scheduled redemption of a close-ended monthly income scheme in August.

Based on July sale price of Rs. 13.50 and last year's dividend of 13.75 per cent, US-64 offered a tax-free return of 10.19 per cent per annum.

Considering the repurchase discount, the actual tax-free return is 7.96 per cent, which works out to over 12.15 per cent pre-tax return for individuals in 34.5 per cent tax bracket and 12.94 per cent for corporates in 38.5 per cent tax bracket.