Uti May Exit Subsidiaries

The Unit Trust of India (UTI) may pull out of its subsidiaries engaged in banking, securities trading, investor servicing, investment advice and training. This follows the proposed organisational restructuring under which these subsidiaries will go to UTI-I to be administered by the government.

The list of UTI's subsidiaries include UTI Bank, UTI Investment Advisory Services Ltd, UTI Investor Services Ltd, UTI Securities Exchange Ltd, UTI International Ltd and UTI Institute of Capital Market.

In an interview with Business Standard, UTI chairman M Damodaran said the Trust was open to the idea of selling its stakes in the associate companies.

However, he added, the complete pullout of the associate firms would take "some time" to happen. There was no specific proposal at present.

Analysts said UTI Bank, among the associates, was expected to fetch a "handsome return" to UTI. At the current market price of 35 a share, UTI's holding of over 8 crore shares in UTI Bank, is valued at over Rs 280 crore.

Alongside, US-64, the beleaguered scheme of UTI, has set a target of pruning its portfolios in 400 scrips.

The US-64 currently comprises 800 scrips as against a year's 1100 stocks. Damodaran said the mutual fund's announcement that it would offload its holding in some companies, which were not performing well, "elicited good response." Some promoters bought back their companies' shares while UTI sold off some companies stocks in the market, he added.

The net result of this portfolio churning exercise was that the number of scrips in the US-64 basket came down drastically from 1100 to 800. US-64 also entered into some fresh counters as a part of this exercise, he added.

The financial and organisational restructuring programme, which was announced on August 30 by the Cabinet Committee on Economic Affairs (CCEA) envisaged splitting UTI into two entities. UTI-I would comprise non-NAV(net asset value) based schemes and UTI's investment in subsidiaries and associate companies while NAV-based schemes will be transferred to UTI-II.

UTI-I will have an asset base of over Rs 24,000 crore will also comprise MIPs and government-guaranteed component of US-64 scheme, will be put under an a government administrator.