The Hindu Business Line : Study suggests measures to broadbase investors

Mr M.K. Sanghi (right), President, Assocham, and Mr Shailesh Haribhakti, Managing Partner, Haribhakti & Company, releasing a white paper on Equity Conversion Option in the Capital on Thursday. — Ramesh Sharma

New Delhi , Sept 15

IN a study on `Equity Conversion Option', jointly prepared by the Associated Chamber of Commerce and Industry (Assocham) and the research team of Harbhakti Group, it has been suggested that 20 per cent of the excess statutory liquid assets (SLR) of the commercial banks can be invested in equity of public sector undertakings (PSUs) identified for disinvestments.

This would boost the capital markets and broadbase the investors' population beyond foreign institutional investors, the study says.

Deposits with banks as on March 31, 2005, stood at Rs 13,11,105 crore, finds the study. Excess SLR with the banks works out to be Rs 2,00,000 crore, of which Rs 40,000 crore could be converted into PSU equity.

The study was jointly released here today by the Assocham President, Mr Mahendra K. Sanghi, and Mr Shailesh Haribhakti, Managing Partner of Haribhakti & Company.

The study also recommends a market price driven conversion to PSU equity on small saving schemes that come up for redemption.

As per the terms of restructuring of UTI, UTI-I needs to be wound up after March next year. To ensure smooth liquidation, the portfolio of UTI-I could be taken over by UTI-II at a discounted value of the prevailing market price, says the study.

As UTI-II is a mutual fund, it could launch a specific scheme for buying the portfolio of UTI-I. This would help stabilise the capital market and control of these companies would continue to remain with the Indian financial institutions, the study adds.

To retain the confidence of the retail investors and induce higher investments from pension funds, the Government, along with the market regulator, could introduce capital protected fundswhich would not only provide steady returns but also protect capital, according to the study.

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