Rollover, reserves to help UTI MIP redemption

UTI’s MIP-1997 had a corpus of over Rs 1,400 crore as on December 31, 2001 while its market value was about Rs 980 crore. The scheme would run a shortfall of around Rs 400 crore when it comes up for redemption after April 30.

According to FI sources, Sebi’s thrust would be to ensure that UTI makes timely repayments on its MIP scheme. Hence, Sebi is likely to permit UTI to float a new scheme to provide a switchover option to unitholders of the close-ended MIP scheme of 1997. The move would provide some relief to the fund.

UTI has already applied to the market regulator for launching a new MIP exclusively for MIP-1997 investors. MIP-1997 unitholders can also opt for reinvestment option in any other UTI scheme open for sale.

UTI is also in negotiation with the sponsors ie, FIs like LIC, IDBI and SBI to bring in additional funds to meet the redemption shortfall. However, according to FI sources, FIs are unlikely to bring in funds immediately for UTI bailout. Sources also stated that the finance ministry had made it clear earlier that there would be no bailout for MIP.

However, investors need not worry since UTI has the option of drawing from its reserves to meet the redemption pressures.

Further, with the option of the new scheme (for which Sebi is likely to give its consent to the mutual fund) and reinvestment in other UTI’s scheme which are open for sale the redemption shortfall may be much less. Hence, drawing the shortfall from the reserve would not be a problem for the mutual fund, sources added.

Meanwhile, the board meeting of Sebi on Thursday discussed at length the recent shortfall in the redemption of UTI’s) MIP scheme. Talking to the media after the board meeting Sebi chief G.N. Bajpai said that the meeting discussed UTI’s recent crisis.

According to Bajpai, “UTI was discussed. Our job is to take care of the investors’ interest. We will take care of it.” However, Sebi chief refused to divulge further details while stating “I don’t want to give details as the discussion is privy to the members of the board. Whatever is necessary to communicate, we will do it at the appropriate time.”

On Tirodkar issue, Bajpai said “We have asked the BSE board to reconsider it. Tirodkar had made a representation to Sebi. So we asked BSE to look into his grievance.”

Sebi has also allayed fears about the fate of regional bourses whose broker-members were asked to step down from top management posts, saying other board members can ensure that the daily operations are carried out smoothly. Sebi last week sent notices to 11 exchanges to amend their bye-laws and remove the broker members from their respective boards.

The move is part of government’s efforts to corporatise stock exchanges after alleged market manipulation by broker members in bse and cse, who had access to price sensitive information from the surveillance departments of the bourses.