Only mutual fund to file cases, erstwhile UTI sees some recoveries

The oldest mutual fund in the country, undivided UTI, is also the only one to figure on the list of institutions that have filed cases against wilful defaulters.

The fund house has 27 cases with Rs 252.6 crore outstanding, according to data from TransUnion Cibil, which maintains a database of such cases.

This is based on accounts where defaults are of Rs 1 crore or more. The cases show a significant drop from 5 years ago.

There were 90 cases of Rs 848.8 crore at the end of 2014. This came down by around a third as of December 2018. 

The cases were the outcome of investments made at the time of undivided UTI in the early 2000s, according to a spokesperson. 

“… these assets pertain to the erstwhile Unit Trust of India and cases with respect to these were filed before 2003. As a majority of these companies are in liquidation, only some legal cases are in continuity,” said the person in an e-mailed response.

The asset manager had written off the investments at that time. Bur some recoveries are happening, said the person.

“These investments were made prior to the bifurcation of UTI on March 1, 2003, and were written off. Over a period, we have recovered money from many defaulters. However, in a few cases, the recovery is in process and efforts are made to settle the matter,” it said. 

The amounts are being credited to the schemes which made the original investments, according to the spokesperson. 

The database shows separate listings for the Specified Undertaking of Unit Trust of India (Suuti). This was formed to handle some of the assets of UTI after the fund was split into two following the collapse of the asset manager’s assured-return schemes. It had 178 cases worth Rs 2,551.3 crore in 2014.

The biggest defaulter is Maharashtra-based Malvika Steel. It owes Suuti Rs 420.75 crore. Marwar Hotels is the biggest defaulter for the UTI Mutual Fund, which lists its cases separately from Suuti. 

UTI Mutual Fund declined to comment on the extent of recoveries. 

Dhirendra Kumar, CEO of fund tracker Value Research, said UTI’s case was unique because of its legacy assets. It had long-term products that allowed for lending in a style different from regular mutual funds.  

Other funds were not capable of taking a credit exposure, which requires active handling such as chasing after recoveries.

“UTI was basically a term lender in the garb of a mutual fund,” he said.

The mutual has been in the middle of a struggle among shareholders. Four public sector companies each owned 18.24 per cent. They were Bank of Baroda, Life Insurance Corporation of India, State Bank of India and Punjab National Bank. International asset manager T Rowe Price is the largest shareholder with a 26 per cent stake. Principal Financial Group has bought Punjab National Bank's stake in their mutual fund joint venture. The other three continue their mutual fund operations besides holding stake in UTI. The Securities and Exchange Board of India requires an entity can only sponsor one mutual fund. It had given time till March for the institutions to bring down their stake to 10 per cent each.

Meanwhile, UTI has been without a chief executive since August 2018. This is when the term of Leo Puri, the previous head, ended. Chief Finance Officer Imtaiyazur Rahman is the acting head of the fund. A planned initial public offer by UTI has also been in limbo because of the conflict between shareholders. 

UTI is currently the sixth-largest mutual fund. It manages assets worth Rs 1.58 trillion.