US-64 prices hiked

MUMBAI, Dec 4: The Unit Trust of India UTI on Friday decided to again hike the sale and repurchase prices of the US-64 scheme by 10 pai...

MUMBAI, Dec 4: The Unit Trust of India UTI on Friday decided to again hike the sale and repurchase prices of the US-64 scheme by 10 paise to Rs 14.90 and Rs 14.60 respectively for January 1999. This is the third hike in US-64 prices by the UTI in the last three months to boost the investor confidence.

In October, the UTI increased the repurchase price of US-64 to Rs 14.40 per unit for the month of November and Rs 14.50 for the month of December. The sale price was also raised to Rs 14.70 per unit for the month of November and Rs 14.80 per unit for the month of December. In September, when the UTI face a crisis of confidence following reports of erosion in the net asset value of US-64, the trust had hiked the sale and repurchase prices by 15 paise each to to Rs 14.55 and Rs 14.25 respectively.

The hike in the sale and repurchase prices is in keeping with the existing practice to send out a positive signal to the market that UTI is capable of meeting any redemption pressure or other problems. UTI hadalways maintained that there was no crisis and that it would keep the repurchase price higher. 8220;The increased repurchase and sale price would give the investors ample confidence that there is nothing to worry,8221; UTI sources said.

The market value of investments made by the UTI under various schemes had fallen by a whopping Rs 10,148 crore during the year ended June 1998. The massive erosion in the UTI8217;s investments follows the fall in the share prices, especially after the nuclear explosion in May this year. The major depreciation was in flagship US-64 scheme which suffered a loss of Rs 3,048 crore in the market value of its investments.

The US-64 portfolio also shows huge current liabilities at Rs 8,808.41 crore compared to Rs 4,014.15 crore in the previous year, an increase by almost 119 per cent. The huge increase in current liabilities of US-64 from Rs 4,014.15 crore to Rs 8,808.41 crore is because of the short term borrowing that US-64 had undertaken to pay the impending dividend in the month ofJune.

According to the abridged accounts of UTI released earlier the unit capital of US-64 has gone up by Rs 1,601 crore to Rs 15,629.70 from Rs 14028.15 crore as on June 30, 1997. This implies that Rs 720 crore has gone into the unit premium account at an average unit price of Rs 14.50. The calculation of NAV of US-64 excludes the value of fixed assets, current assets, assets of development reserve fund deposits and other investments.

US-64 is India8217;s largest savings scheme and does not come under any regulations of the SEBI. Sebi had written to the finance ministry way back in 1996 that the UTI is dipping into its development reserve fund to pay off its investors.

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Already many small and corporate investors have applied to get out of the scheme. The finance ministry has set up a committee to suggest measures to restructure the US-64 portfolio. The committee is expected to submit its report soon.