No loss of faith in US-64 - UTI chief

By Our Special Correspondent

CHENNAI, AUG. 20. It will not be in the interest of the large body of investors in the US-64 scheme of the Unit Trust of India to exit from the scheme on consideration of the ``temporary loss of value'' faced by them as distinct from capital loss, Mr. M. Damodaran, Chairman of the UTI, said here today.

Addressing a press conference, Mr. Damodaran said that in contrast to media predictions of exodus of investments to the tune of hundreds or even thousands of crores of rupees from the UTI scheme, redemptions from the opening of the ``special liquidity package'' on August 1 till August 16 totalled only Rs. 82 crores. This reflected essentially the liquidity needs of investors and not any loss of faith in the UTI or availability of better options to them.

He said not one rupee had been used by the UTI so far from the line of credit obtained from banks to meet ``the worst case scenario'' and expressed the hope that investors would not be misled by either motivated or misinformed criticism of the functioning of the country's largest single mutual fund scheme as also the UTI itself and ``exaggeration'' of its present problems.

Mr. Damodaran traced the roots of the present crisis to the failure to dispel the widespread impression, not warranted by either the UTI Act or the terms and conditions of the scheme, that US-64 was an assured returns scheme.While refusing to go into the past investments and transactions undertaken by the UTI, which are being investigated by an expert committee, he said even in the case of the company in whose scrip a particular private placement at Rs. 930 is now under investigation by the CBI, the UTI had earlier earned a profit of Rs. 8 crore from the scrip, by buying at Rs. 500 and selling at Rs. 1,050, when private funds had acquired shares at above Rs. 1,000.

The UTI Chairman said the Trust would consider transfer of some schemes to other entities only where it would serve the interests of both the UTI and investors. Similarly, there would be no ``distress sale'' of either equity holdings or real estate property.

A suggestion ``which had come from outside'', for apportioning small parts of schemes to private fund managers to serve as benchmarks, was also under consideration.

Sale of holdings would be restricted to ``marginal holdings'' or overweighted scrips which did not promise bullish prospects. In the past two weeks, the UTI had unloaded holdings without any bearing impact on the market and also made some profits.

The trust was also making some purchases, he said, and added that talks on ``strategic sale'' of holdings of US-64 were under way with some interested parties who had approached the UTI.

Pointing out that unlike other mutual funds, the investor base of the UTI was not restricted to urban areas but represented a much larger section of the population, he appealed to media not to put out misleading or unduly alarmist reports which would only hurt investors.

In a market scenario where all mutual fund schemes had fared poorly, US-64 performance had been relatively better and it also declared a dividend of ten per cent for the year ended June 30, 2001. It continued to offer a better guaranteed rate of return than fixed income instruments.

With restructuring and rebalancing now under way, it would continue to be solvent and liquid. Out of the 37 equity schemes that outperformed the Sensex during 2000- 01, as many as 11 belonged to the UTI stable.

Mr. Damodaran said the proposed switch-over to NAV-based pricing might be introduced in October/November, though the committed deadline was January 1, 2002.

Our Corporate Bureau adds:

Mr. M. Damodaran dismissed suggestions that the public sector mutual fund was resorting to `inter-scheme transfers' to bail out the US-64 scheme. He asserted that inter-scheme transfers ``are done at pre-determined prices that are entirely in accordance with SEBI regulations. He brush- ed aside insinuations that these transfers were done in a clandestine and non-transparent manner.

Mr. Damadaran made it clear that the UTI would ``deliver on what we have promised'' on MIPs (monthly income plans). While admitting that some MIP schemes might be having lesser corpus at the moment, he, nevertheless, said ``when the day of reckoning comes, we will deliver on what we have promised.''

The chairman said ``The UTI will offer shortly more facilities to investors in some of its ongoing schemes.'' He hinted at introducing an income option in select schemes that did not have such a facility at the moment. He also said the UTI was also contemplating sector and client group-specific schemes to ``target the large investible funds'' lying with these investors. He, however, declined to divulge details of these schemes.

In the wake of US 64 imbroglio, the UTI, he said, was being restructured ``so as to make it cater to the requirements of 21st century organisation.''

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