Offload Cantriple at current premium to NAV as it faces an uncertain future

July 3: Cantriple is to cumulate its funds in a way that at the end of 90th month, an investor will get three times the initial investment...

July 3: Cantriple is to cumulate its funds in a way that at the end of 90th month, an investor will get three times the initial investment. SVenkateshan manages Cantriple at Canbank Mutual Fund.

Cantriple has a large cap orientation. The fund8217;s equity portfolio is stacked with PSU stocks accounting for a third of the total net assets. However, not all the scrips are bluechips. Hindustan Zinc, Bharat Electronics, Hindustan Cables, HOC, Bongaigaon Refineries and STC are either inactive or illiquid or are out of favour. Top industry exposure includes petroleum, telecom, non ferrous metals and banks. The fund has a relatively stable and high yielding portfolio.

Cantriple was an above average performer initially and appreciated by over 100 per cent within two years of launch. The journey has been downhill since then with its NAV dipping by 26 per cent since touching a peak of Rs 21 in January, 1994. The fund has an unenviable task of appreciating by around 90 per cent within a year to achieve itsobjective. With over 50 per cent deployed in non equity investments, this seems a Herculean task even in the event of a equity boom.

Cantriple is in all likelihood going the Canstar way. Based on the current NAV, the fund faces its shortfall of around Rs 400 crore. The AMC has indicated that the target return in Cantriple will not be honoured. Even in the case of Canstar, it was not the Rs 60 crore AMC which pumped in money to honour commitment. After pumping in close to Rs 600 crore to bail the AMC out of the Canstar imbroglio, it is unlikely that Canara bank will be magnanimous to honour commitment in Cantriple .

Canstar has surely set the precedence for investors of assured return schemes to scale their expectation. Cantriple is among the assured return schemes which trade at a premium to their NAV. Instead of waiting, investor should use the opportunity to exit from the secondary market. For the adventurous investor, at the current market price, Cantriple could yield 85 per cent within ayear.

8212; Value Research