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UTI chief rules out heavy redemption in US-64

UTI chairman M Damodaran on Thursday asserted there would be no dearth of funds for meeting the commitments in its flagship scheme US-64 and assured there would be no heavy redemption demands due to the higher returns the fund is offering.

"I don't foresee any heavy redemption due to the large dividends the UTI has been offering and the increase of ten paise per unit every month is the best return they can get," he told reporters after a meeting with Union Finance Minister Yashwant Sinha in New Delhi.

Damodaran also said the all the 27 banks have already assured UTI of their willingness to lend at sub-PLR rates for US-64 scheme if the need arose.

He said the UTI will undergo a comprehensive restructuring in the next twelve months to fine-tune the organisation and its management.

He also said that UTI will reduce its equity exposure and move to debt.

"We are dealing on their (investors) behalf. We have to give them good return," he said on selling of stock in the market.

On the line of credit that could be made available for UTI in case of need, Damodaran said all kinds of options and combinations could be worked out.

"However, I don't need a whole lot of money as the redemption would not be significant," he said.

Asked whether the demand for meeting redemption commitment could be between Rs 20-30 billion, he said this type of resources will be required if only around two-thirds of the 20 million investors queue up for redemption.

"I don't think this will happen. Small investors will stay with us," he said.

On whether the UTI would seek sovereign guarantee, Damodaran merely said any such assurance would not be required now.

He said the interest of the 20 million investors in the US-64 would be fully protected.

On the need for enhancement of the ceiling of 3,000 units to be accepted for redemption, Damodaran reiterated the redemption for even the current offered level will not be high.

Damodaran who has been given a one-year term to head the beleaguered mutual fund said the conversion to net asset value from the current administered pricing would begin on January 1, 2002.

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