Sbi Mutual Fixed Income Scheme In April
Business Standard: What are your plans for launching a new scheme?
MP Radhakrishnan: We are planning to launch a fixed income product on April 17. We are in the process of designing the product as a monthly return scheme, by which the unit holder will periodically receive a fixed assured sum. A guaranteed return of 15 per cent is targeted for the first year, with a cumulative yield of 16.08 per cent.
The scheme will be designed as a close-ended scheme for a five-year period, which can be extended for another year. Additionally, repurchase will be offered after one year. An indication about expected returns would be given at the beginning of the second year and the scheme aims to collect a corpus of Rs 20 crore. While this scheme will not allow NRIs to repatriate the income generated by the scheme, we are planning to launch another debt scheme which would allow NRIs to do so. BS: What is the current status of Magnum Multiplier Plus?
MPR: The Magnum Multiplier Plus, which is a close-ended scheme, was launched in February 1993 and commenced investments in December 1993. Since March 1, 1996, the fund began repurchase of units at NAV according to the terms of the scheme, following which the initial corpus of the fund has dwindled from Rs 967 crore to the current figure of Rs 596 crore.
The latest NAV for the scheme stands at Rs 13.40. The scheme has around 13 lakh investors consisting mostly of small investors not holding more than one lakh units. Initially, SBI Mutual Fund planned to issue rights to the unit holders of Magnum Multiplier Plus scheme as per the terms mentioned in the offer document of the scheme, following the recent lifting of the ban on mutual funds on issue of rights by Sebi. The fund proposed to issue rights in the ratio of 1:4.
However, the board of directors of SBI Mutual Fund has now decided to convert the scheme into an open-ended one. It has been decided to hold a postal ballot for this purpose. A chartered accountant and other executives have been hired by the fund to carry out the accounting part of the postal ballot. This is a very costly process and the fund has already spent in excess of Rs 80 lakh for this purpose. One effective way of reducing this cost is to send letters to each of the shareholders asking for their consent. If they respond positively, then the scheme will be naturally converted into an open-ended one, and if they do not, then it would be taken for granted that they would prefer the exit route and are, therefore, against the conversion. We are planning to approach Sebi in this regard.
BS: How would the stock markets behave in the coming months?
MPR: I feel that the stockmarkets would be good and the indices would start moving up. This is primarily due to a very good budget presentation. The sops announced in corporate as well individual taxes were welcomed by the market and the relaxation of FII investment ceiling to 30 per cent also brought cheer to the market. But, what is most important is the fact that the government has also come up with a good follow-up action.