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Experts urge UTI to auction shares, advocate FD status

Unit Trust of India must evolve a sales strategy for its large holding of shares in several companies so that it could fetch better earnings from sales particularly when the capital market is depressed.

According to experts in the securities market, the UTI can go for auctioning the shares of companies in order to get more realistic returns from sale of shares and meet the present liquidity shortage that it faces following large redemptions of its US-64 schemes.

They also felt that the Unit Scheme-64 should not be brought under the mutual funds guidelines and must be treated as any fixed deposit scheme of banks and post offices. The gap between net asset value of US-64 and its purchase prices is so wide now that the scheme is not suitable to be treated as mutual fund scheme.

In fact, a few officials of the Securities and Exchange Board of India said the UTI must be treated as a separate identity outside the SEBI purview till the time the capital market improves and the trust develops its own NAV for all schemes and then becomes a mutual fund under the SEBI Act.

The UTI's structure is different from that of other mutual funds which are set up as trusts and are managed by separate asset management companies.

Under the mutual funds regulations, the SEBI managed to force the sponsors and asset management companies to pay Rs 12 billion to the investors last year by way of shortfall to meet committment under their various assured return schemes.

Recently, the regulatory body wrote to the Association of Mutual Funds of India seeking suggestions for setting up an independent institution for calculation of NAV of various mutual funds in the country.

This would ensure standardisation of NAV calculations, a senior SEBI official said.

At present, the SEBI can inspect the UTI under the voluntary arrangement made in July 1994 and all offer documents of various UTI schemes are submitted to the SEBI for comments only. The UTI has 76 schemes of which 27 have assured returns.

There are 39 mutual funds registered with the SEBI (excluding the UTI) having total corpus of Rs 750 billion with the UTI's corpus share of Rs 600 billion.

UNI

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