TIMES NEWS NETWORK [ FRIDAY, SEPTEMBER 20, 2002 01:16:44 AM]
MUMBAI: The government has asked the Unit Trust of India not to make distress sales in the market for meeting redemption pressure on the assured return schemes. It has also agreed to give more money to UTI.
UK Sinha, joint secretary in the finance ministry (capital market division), said on Wednesday that the government will provide additional liquidity to UTI so as to avoid "equity bleeding" for redeeming schemes in UTI-1, to which all assured return schemes will be transferred.
This assistance is in addition to the Rs 14,500-crore bailout package announced by the government last month.
"The government's commitment to UTI is more than meeting the shortfall in all assured returns schemes of UTI-1. We want to ensure that UTI will not have to make distress sales of prized holdings to meet redemptions," Sinha said.
The government conveyed this to the UTI board at its meeting, held today to finalise the modalities for redeeming MIP '97 (IV). The monthly income plan, which is coming up for redemption on October 31, has to make payments of Rs 1,185 crore, of which there is a shortfall of Rs 312 crore.
UTI has finalised the modalities for redeeming MIP '97 (IV), under which the investors will be given a choice to take RBI's 7 per cent tax-free bonds against the units they are redeeming. Trust chairman M Damodaran said, "Investors will have the freedom to take securities or cash while redeeming their units."
The UTI board has also finalised the restructuring of US-64, under which the scheme will be split into two.
It is decided that the administered price part of US-64 will remain with UTI-1 while the NAV-based portion will be named Unit Scheme-2002 (US-02) and will become a part of UTI-2, which encompasses all NAV-based schemes. All those who invested in US-64 after July '02, when it became NAV-based, will be under the new scheme. US-02 as of now has Rs 181 crore of assets.
Mr Damodaran said that UTI will approach the Securities and Exchange Board of India (Sebi) to explain the rationale for dividing US-64 and will seek approval for US-02. It will also split the assets of US-64 on a proportionate basis between the two schemes.
On the government support, the UTI chairman said, "It is clear that we are not going to come to the market to sell crown jewels for a song. We will get a good price for our holdings through strategic sales."
Meanwhile, UTI has declared a 10 per cent dividend for Mastershare 86, whose NAV as on September 18 stood at Rs 11.36 per unit. The institution has also declared a dividend of Rs 2.50 per unit (face value Rs 100) for charitable and religious trusts and registered societies scheme.