UTI suspends sales of US-64, prunes dividend

By Our Special Correspondent

NEW DELHI, JULY 2. The Unit Trust of India has suspended sales and repurchase of the widely held US-64 scheme for six months from tomorrow. This is being described a stabilisation move and may prevent UTI reserves from turning negative following the downward trend in its net asset value (NAV).

Announcing this here today, the UTI chairman, Mr. P. S. Subramanyam, said the dividend was also being scaled down to 10 per cent - Re. 1 per unit - from 13 per cent last year. As for the suspension of US-64 till December this year, he said this would enable the trust to restructure the scheme in view of the volatility of the stock markets. This would not, however, affect the liquidity of the scheme as it was listed in the wholesale market, he said.

The UTI chief said the six months suspension period would also help avert the prospect of reserves owing to the decline in its NAV. The breathing space would be used to divest strategic holdings of the scheme securing better prices. The other non- permissible assets, according to Securities and Exchange Board of India regulations, held by the scheme may also be transferred out to make it ready for calculation of NAV at periodic intervalues. He said the UTI was working on a tight schedule to ramp up all systems and procedures to ensure smooth transition to the desired NAV mode and assured that the NAV would be announced before July 2002.

In this context, he disclosed that a committee had been set up with the chairmen of the Life Insurance Corporation (LIC) and the General Insurance Corporation (GIC) along with himself and another trustee on the board to sell the block holdings over 10 per cent in any company, as directed by SEBI.

He said it had been expected prior to this year's budget, the UTI would be in a position to switch US 64 to NAV based pricing. But post-budget events belied expectations with the bearish markets and stock market irregularities affecting the valuations of the scheme adversely. These events in turn accentuated stock market reforms such as abolition of badla and introduction of rolling settlement, index and stock options. ``Under these circumstances, restructuring of US 64 portfolio would necessarily call for time'', he said. Addressing a press conference, he said investors who have opted for reinvestment of dividend under the scheme, normally done at 2 per cent discount to the July opening sale price, are being given the option to reinvest dividend at the first sale price fixed when it re-opens for sale or invest in other UTI schemes or receive the amount in case.

Meanwhile, he assured the liquidity needs if any of the investor were taken care of since US 64 was listed on the wholesale debt segment of the National stock Exchange, OTCEI and the Bangalore, Delhi and Ahmedabad stock exchanges.

Giving details of UTI's performance during 2000-01, he said total sales were estimated at Rs. 10,143 crores while repurchases and redemptions were estimated Rs. 11,929 crores, 6 per cent lower than last year. Total mobilisation under US 64 which constitutes 26 per cent of the total sales was estimated Rs. 2,661 cores. Repurchases during the year were Rs. 5,962 crores. During April- May 2001, the scheme had significant repurchases of Rs. 4,151 crores. The unit capital of the scheme is Rs. 12,778 crore as on June 30 2001.

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