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Unlisted cos lure tech funds

Our Bureau

CALCUTTA, Feb. 25

AMIDST a general demand that they be allowed to allocate a larger portion of their net assets to unlisted companies, a section of mutual funds are seeking permission from SEBI to satisfy a growing appetite for such companies.

Investment circles attribute the phenomenon to the rise of technology funds, which a number of leading MFs have introduced. The more recent of these are from Kothari Pioneer, IL&FS and Sun F&C, while Kotak Mahindra's tech fund is now open for initial sub scription.

The promise borne by technology-driven sectors, often outside the realm of comprehension for the lay investor, has prompted MFs to bet on unlisted companies in these sectors. The feeling is that some players would leverage to the hilt the provision of in vesting part of their assets here.

In the present context of technological changes, MF sources indicate, unlisted companies are likely to come up from areas as diverse as genetic science to R&D laboratories to Internet commerce. Given this diversity, tech funds are looking at investing se lectively without running big risks.

Investing in the pre-IPO stage could perhaps be an attractive proposition, provided the companies concerned do not delay their plans to go public, it is felt. An IPO, especially if it opens at a level higher than the offer price, could provide an exit ro ute for MFs.

A fund itching to go in for pre-IPO cases, however, could face a problem of scarcity. The problem arises because there are not too many unlisted _ and bankable _ companies in the emerging areas. Bio-technology, for instance, seems to hold significant lat ent promise; yet, unlisted bio-tech companies are really still not in the fund manager's grip.

As an MF source pointed out, the market is only dimly aware of the investment power that the tech funds can collectively unleash. Together, these dedicated schemes are set to command hundreds of crores. Recent initial offers from IL&FS (eCom Fund) and Ko thari Pioneer (Internet Opportunities Fund) are indications of the shape of things to come.

The Calcutta-based MF distribution outfit, SKP Securities, feels it would be difficult (for investors) to keep track of particular stocks in the tech-oriented sectors, which, thanks to IPOs, will continue to throw up major opportunities. For individual i nvestors, this would be a lottery-like situation, given the uncertainty with allotments. Firm allotments, however, would not elude MFs.

It might be mentioned here that warning bells have started ringing within the MF industry. A section of funds are cautioning against a possible over-dependence on IPOs. MF management, it is being strongly felt, should remind themselves of the days _ the early 1990s _ when the market featured IPO-dedicated schemes. The subsequent bust had made things difficult for these players.

The IPO issue came to the fore in recent days when the TV Eighteen stock listed at a huge premium. Several schemes from the Alliance Capital stable were given allotments. Alliance 95 and Alliance Equity Fund, maintains a study by SKP Securities, became t he top performers in various categories during the listing week.