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US-64 may not be linked to NAV till June 2002

Ashok Jainani

MUMBAI, June 26

THE Unit Scheme-1964 (US-64) of the Unit Trust of India (UTI) is unlikely to be linked to net asset value (NAV) at least till June 2002. Accordingly, the scheme will not come under the fold of the Securities and Exchange Board of India (SEBI) till such t ime.

Earlier, the scheme was expected to be made NAV-driven by February 2002 as per the recommendations of the Deepak Parekh committee in February 1999.

UTI trustees, who will meet on July 2 to consider annual results for the year ended June 30, 2001, will also consider whether to make the scheme NAV-driven by February 2002 as earlier suggested.

The scheme had come under severe pressure following redemptions of over Rs 1,965 crore by corporates in May. The large-scale redemptions were due to fears with regard to the fate of the scheme following February 2002 when it was slated to be linked to NA V. As a result of poor performance of the scheme over the last year and massive redemptions, the gap between the scheme's sale/repurchase price and the NAV had widened.

Senior UTI officials said that the board will be presented ``all the facts and figures'' relating to the scheme as on June 2001. They will also consider all possible measures to be taken ``immediately'' to restructure the scheme for making it linked to t he scheme's NAV.

``The final decision whether to make the largest scheme NAV-driven by February or June 2002 remains the prerogative of the board,'' senior officials said.

There has been debate and queries with regard to making US-64 NAV-driven. The Deepak Parekh committee, which had prescribed that the ``scheme can not be delinked from NAV indefinitely, but it should be made NAV-driven within three years.'' The report, wh ich was commissioned by UTI board and not either by SEBI or the Central Government, was submitted in February 1999.

However, implementation of this report began in June 1999 with UTI launching a special unit scheme-1999 (SUS-99). The scheme was structured as a Rs 3,300-crore bail-out plan for UTI. The Government of India (GoI) subscribed to the units of SUS-99 and tra nsferred UTI's holdings in public sector undertakings (PSUs) to the new scheme.

Taking the argument that US-64 restructuring began only in June 1999 with the launch of SUS-99, UTI has time till June 2002 to make US-64 NAV-driven.

UTI does not need, senior officials said, any approval either from SEBI or GoI for deferring its plan to make US-64 NAV-driven as the scheme is not under the purview of SEBI as yet and the Deepak Parekh committee report was appointed by no outside agency other than UTI board. However, the US-64 restructuring plan as per the recommendations of the Parekh Committee, was accepted by the GoI which then subscribed to units of SUS-99.