Unit Scheme 1964, the flagship scheme of Unit Trust of India, has witnessed a surge of about Rs 400 crore in corporate inflows during the last two months. The scheme closed the year on May 17, as the book closure period began, with its total corpus at about Rs 20,000 crore.
UTI chief general manager in charge of market operations B G Daga told Business Standard yesterday that the huge corporate investments came in April-May as the funds crunch in industry began to subside and corporates showed renewed confidence in US-64. A large South Indian group is believed to have pumped in huge amounts.
UTI is clearly upbeat, since the redemption pressure on the countrys largest mutual fund and its pivotal scheme is considerably lower these days. Daga said that after another of its large schemes, Mastergain 1992, went open-ended from January 1, the redemption has been manageable, clocking only Rs 50-60 crore in all, with the impact further reduced by the inflows of about Rs 22 crore into the scheme.
Things are very different from what they were last year, Daga said, visibly relieved about the considerably higher interest, of late, in UTI schemes. The total corpus of UTI now stands at Rs 56,000 crore as a result of the adjustments of inflows and outflows so far. While US-64 is now closed for the rest of the year, the rest of the schemes are still open.
US-64, Daga said, had a total corpus of Rs 20,000 crore, and its unit capital stood at Rs 14,000 crore, after factoring in last years one for 10 bonus of units.
Total sales during the year in the scheme, he said, stood at about Rs 1,700 crore, with the redemption still higher at Rs 2,500 crore. But this is least worrying for UTI for two reasons: one, the net outflow in the scheme is much lower than the level at the end of last year, when the negative figure jumped to a hefty Rs 7,000 crore, as corporates rushed to withdraw from the scheme, causing enormous problems for UTI both in payouts and in servicing; and two, if the bonus element is factored in, the redemption does not look big at all.
This is so because many who were dependent on the bonus units had come to UTI for redeeming them, and UTI had also taken a decision to send payment cheques (and not bonus units) for those investors whose bonus units were 20 units or less. This automatically meant a redemption for those bonus units. If these are taken into account, the total net outflow in the scheme goes down even further, Daga points out.
Daga listed several positive factors for the bullish view taken by UTI. With the landmark 1997-98 budget and monetary policy this year, the credit flow has improved. Banks are flush with funds and artificial barriers in the various segments of the financial market are crumbling. Daga emphasised that there was a clear swing back to equity as returns from the debt market had begun to go down following a reduction in interest rates. This reduction has made schemes like the Monthly Income Scheme 1997 (II) of UTI, offering 14 per cent return, and the Institutional Investors Special Fund Unit Scheme, offering 15 per cent return, very attractive.
