The Monthly Income Plans (MIPs) of the Unit Trust of India, which have a total corpus of about Rs 20,000 crore, would get into serious liquidity trouble, with the Trust deciding to swap the real estate and debt portfolio of its flagship US-64 with the corpus under the development reserve fund (DRF).
UTI has about 20 MIPs which are still in currency with a total corpus of over Rs 20,000 crore. Under the MIPs, which are close-ended schemes, the Trust assures fixed returns to the investors backed by a guarantee provided by the DRF.
The DRF, as on June 30, 2001 had a corpus of about Rs 1,200-1,500 crore.
According to UTI sources, the DRF would be completely wiped out when the real estate and debt portfolio of US-64 are transferred to the DRF and an equal amount is withdrawn from it. They said these assets would be transferred to the DRF at market value. The real estate and debt portfolio of US-64 had a market value to the tune of Rs 1,200 crore, they added.
Analysts said the equity exposure of these funds had eroded sharply due to the meltdown in the markets. Also, the weak quality of paper held by the Trust had left many of these schemes with significant non-performing assets. The Malegam Committee had recommended that the debt funds of UTI should shed their equity exposures completely.
Mutual fund trackers also said that some of the MIPs had negative reserves, which could further erode the DRF. The DRF guarantees capital protection for the MIP investors.
The UTI had launched several MIP schemes in the last four years. Some of the MIPs offered returns as high as 14-16 per cent, they said.
