The Hindu Business Line : Govt will get back its investment in SUUTI with interest: Mathur

Whatever balance assets are left, whether real estate or investments in unlisted companies, we have to realise them. We are seeing a process of recovery of capital market that has seen many of the thinly traded companies coming back to the trading platform.

Mr S.B.Mathur, Administrator, Specified Undertaking of Unit Trust of India

Chennai March 19 Few former chairmen of the Life Insurance Corporation ever hang up their boots quietly on retirement. There is always one more assignment or problem to tackle for the Government. And who better than someone like a top LIC executive, who has handled challenges on a gigantic scale

Mr Sunil Behari Mathur, who retired as Chairman of Life Insurance Corporation in October 2004, was looking to settle into a quiet retired life in Delhi.

However, there was one more challenge awaiting this soft-spoken insurance professional (a chartered accountant by professional training), - execute a plan to gradually unwind the mess created at the Unit Trust of India (UTI).

The Specified Undertaking of UTI (SUUTI) or UTI-1 was created in February 2003 to take over about 25 assured return schemes including US-64, of the beleaguered UTI. All the assets (valued at about Rs 17,000 crore to Rs 18,000 crore) of these funds including investments in both listed and unlisted companies were transferred to authority.

The administrator was charged with the task of meeting the liabilities of investors in the US-64 and other assured returns schemes. The US-64 scheme was closed in June 2003 and investors were given the option of either cashing out immediately or converting it into 5-year 6.75% tax-free bonds maturing in June 2008.

Other assured returns schemes were closed in April 2004, with investors being given similar options of investing in bonds that mature in April 2009. Together, these liabilities account for about Rs 15,000 crore.

Today, a booming stock market, rising realty market and a resurgent economy have helped SUUTI achieve in large measure the purpose for which it was created. The value of the assets is considerably higher and Mr Mathur feels that the position is fairly comfortable.

Mr Mathur admits with unusual modesty, that in the beginning he was apprehensive whether he would be up to the task. But as things evolved, he says, "It's not something I'll regret. I can look back with some satisfaction."

Excerpts from the interview:

Has the mandate given to you been fulfilled?

The idea at the time of setting up of the authority was that the administrator of SUUTI and the team should gradually realise the value of those assets without disturbing the market or the valuation of those companies, and collect money to redeem the liabilities to investors.

Investors under these schemes were given options - for instance the small ones were given exit options. Some opted to cash out. Others were given tax-free bonds maturing in June 2008 and April 2009.

The primary focus of the authority is to realise those assets and settle the liabilities. Over a period of time, most of the assets held in listed companies have been sold and at good rates. Most of the money put in by the Government is now available for giving it back to them - including some amount as compensation for the time value of money.

We have tried to sell off some investment in unlisted companies, through a transparent process of public advertisements and valuations by independent investment bankers. There were limited takers. But we have done it successfully in some cases and recovered more than the book value.

As things stand, our assets are around Rs 31,000 crore (plus or minus Rs 1,000 crore) depending on market valuation. Our liabilities are about Rs 15,000 crore plus some interest to be paid till the bonds mature. One can say, that fund wise, the situation is quite comfortable.

Where is this invested?

About half of this (i.e. about Rs 15,000 crore) is represented in investment in just three companies - UTI Bank, ITC and L&T. Here, the Government will have to take a view on what is to be done.

Even if these are not divested, till the liabilities arise on the bonds, we are fairly comfortable and barring shortage of about Rs 500 crore (cash shortage), we will be able to redeem those liabilities.

The purpose of establishing SUUTI has more or less been achieved. And only a little residual work remains to be done.

Who gets the surplus?

The surplus belongs to the Government. They provided the money and support and now they are getting it back along with some compensation.

What do you propose to do about the UTI Bank stake?

These are matters of policy. The Government is the owner and it is up to them to decide. There is a limited role for SUUTI in this. Our job is to execute the Government plan. Ultimately, they have to decide the framework and future course of action.

What is your agenda now?

Whatever balance assets are left, whether real estate or investments in unlisted companies, we have to realise them.

We are seeing a process of recovery of capital market that has seen many of the thinly traded companies coming back to the trading platform. They are providing opportunities. In some cases, we have not been able to find buyers in spite of advertisements and investment bankers.

What would be the value of unlisted companies?

That is difficult to say. All of them are at book value as per SEBI guidelines.

How much have you been able to realise by way of real estate?

I can't give you the exact figures off hand. But we have realised about Rs 500-600 crore so far. In terms of the total volume, it is not very significant. But the real estate was spread all over the country. We did face some difficulty in disposing off property in smaller towns.

In terms of value, it does not sound great. But in terms of effort put in, the enormity of the task, we have done very well.

Is there still some value left to be unlocked in real estate?

Yes. In some cases, for instance in Mumbai, government permission is awaited. In some cases, the chain of title is not there or is defective. These things keep happening, but we are trying our best.

During this period, real estate prices have gone up and many companies, which were earlier considered worthless, have become valuable because of the land. If we sell the land today, someone may question why we sold it for Rs 10 and why not Rs 100?

So we have made it a point to sell only through a transparent bidding process. We have also talked to other institutions to try and get everyone together on this issue; we were not always successful.

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