UTI ready to take on US-64 redemption challenge

By Our Special Correspondent

MUMBAI, JULY 31. The Unit Trust of India Chairman, Mr. M. Damodaran, today said that he is not expecting much redemptions to happen when its premier fund Unit Scheme - 64 (US-64) opens for sale and repurchase on August 1. He was confident that retail investors would stay with the scheme as the returns were still attractive.

Addressing a press conference here today, Mr. Damodaran said that it makes economic sense for the investors to stay with the fund because this is the only scheme which would offer increased returns month after month.

Since UTI's announcement to discontinue sale and repurchase of US-64 for six months, a concern has been voiced that temporary withdrawal of liquidity might adversely affect US-64 investors' genuine need for cash in case of an emergency. Recognising this, UTI has devised a special liquidity package for its unit holders.

This package provides an exit window, for holding up to 3,000 units of all unit holders on the books as on June 30, any time from August 1 (with assured price starting from Rs. 10 and increased by 10 paise every month) to May 31, 2003 or Net Asset Value (NAV) based price from January 1, 2002, whichever is higher.

Moreover, UTI will utilise this time to bridge the gap between the sale/repurchase price of US-64 and the basic value of its underlying assets. This period will also help US-64 to enhance capital gains through more focussed fund management and to realise value from fixed assets to safeguard the interest of long term investors.

According to Mr. Damodaran there is no other investment in the market which assures that Rs. 10 as on August 1, 2001 will grow to Rs. 12 as on May 1, 2003. Besides subject to availability of distributable surplus, there could be additional accrual by way of dividends in July 2002 and 2003.

In case of any redemption pressure UTI has tied up a line of credit with a large number of banks to ensure liquidity for the scheme. State Bank of India (SBI) is leading the consortium of banks.

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Section  : Business
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