Financial Daily from THE HINDU group of publications
Tuesday, Jan 29, 2002
Financial Daily from THE HINDU group of publications Tuesday, Jan 29, 2002 |
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Markets
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Mutual Funds UTI writes off 50% of NPAs in monthly plans Dinesh Narayanan
MUMBAI, Jan. 28 THE Unit Trust of India (UTI) has written off 50 per cent of NPAs in its monthly income plans (MIP). The provisioning would be accelerated over the next six months to 100 per cent, according to the Assistant General Manager, Ms Anagha Hunnurkar, who manages assets worth about Rs 2,200 crore under three MIPs and a money market fund (MMF) at UTI. Ms Hunnurkar said the total non-performing assets (NPAs) were about Rs 145 crore — Rs 92 crore under MIP 1998, Rs 10 crore under MIP 2000 (II), and Rs 41 crore under MIP 2001 — and the entire amount would be written off by June. The accelerated provisioning had eroded the net asset value of the schemes. Even though dividends were being paid out of internal accruals at present, the development reserve fund (DRF) might have to be tapped on maturity, she said. The NAV of MIP 1998 has fallen from Rs 901.6 crore at the beginning of the half year to Rs 850.1 crore as on November 30, 2001. The NAV of MIP 2000 (II) has eroded from Rs 472 crore as on June 1, 2001 to Rs 450.5 crore as on November 30, 2001. The NAV of MIP 2001 stood at Rs 628.1 crore (Rs 644.22 crore). The MIP 1998 has an assured return of 12.5 per cent per annum, MIP 2001 yields 9.75 per cent per annum and MIP 2000 (II) returns 9 per cent per annum. The latter two schemes have a reset clause according to which yield can be revised every year. "Due to the revised SEBI guidelines, we had to provide in 18 months what we normally provide over a period of time,'' she said. Ms Hunnurkar said offsetting the sudden write-offs was also difficult because the schemes were closed-ended. "In comparison with other funds, MIPs' being closed-ended is a handicap. It restricts the freedom to trade. It is not easy to move in and out of the market, especially in schemes such as MIP '98, which have assured returns,'' Ms Hunnurkar said. Besides, 80 per cent of the portfolio is illiquid, which leaves very little space to operate. "With only 20 per cent of the portfolio available for operations, trading also does not help much unless there is a steep fall across the yield curve,'' she added. She said it had not yet been decided whether MIP 1998, which matures in October 2003, would be made open-ended. "That would depend on the then prevailing interest rates and NAV,'' she said. Ms Hunnurkar, who likes to follow a conservative strategy of low margin, high volume trading, currently retains almost 70 per cent of the corpus of the money market fund in cash. She said the average maturity of the MMF portfolio was about 25 days. As at November end, the annualised returns of the fund for 15 days, 60 days, 90 days and 365 days stood at 8.2 per cent, 7.41 per cent, 7.26 per cent and 9.08 per cent respectively.
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