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UTI faces Rs 110 billion liquidity gap

B G Shirsat

The Unit Trust of India is likely to face an aggregated asset-liability mismatch of Rs 110 billion in the coming three years, while paying off its assured-return monthly income plans.

This is apart from the shortfall in the maturity value from the assured redemption value of the 13 MIP schemes that come up for redemption between April 2002 and March 2005.

While the UTI brass has been focusing on meeting the difference between the assured value and the net current value of the investments-estimated at Rs 33.88 billion-the bigger problem it faces is of raising cash to meet the full amount of redemption.

Since UTI cannot liquidate all its assets held in particular schemes ahead of the redemption date, it either has to pledge securities and raise fresh loans from institutions or resort to a fire-sale of assets.

In the latter circumstance, due to the mismatch on account of the depreciation of assets, non-performing assets will be further exacerbated.

Earlier, UTI would have managed to raise cash by transferring assets to other schemes in the portfolio to meet the redemption pressure. But since all its schemes are in the same boat, it is unlikely to escape selling assets outside the fold.

All told, UTI needs a kitty of Rs 110 billion to redeem all its 13 MIPs.

This Business Standard Research Bureau study covers 13 MIP schemes that mature at par value between April 30, 2002, and March 31, 2005.

The current net asset value of the investments under these schemes stood at Rs 128.93 billion as on March 31, 2002, against which the maturity value is estimated at Rs 162.81 billion.

On the face of it, the gap between assets and liabilities is Rs 33.88 billion, which is the difference between the current value of assets and liabilities.

However, the asset-liability mismatch of the 13 MIP schemes goes up further as securities worth Rs 74.44 billion mature only after the date of redemption of these schemes.

Of the total corpus of Rs 128.93 billion, assets worth Rs 41.93 billion mature before the maturity dates of the schemes. Also, UTI has acknowledged that it has not made provisions for Rs 2.75 billion of NPAs.

Thus, UTI faces an obvious asset-liability mismatch of Rs 74.44 billion which, when added to the shortfall of Rs 33.88 billion and uncovered NPAs of Rs 2.75 billion, works out to Rs 111.07 billion.

This, however, does not include the amount of assured dividends in the interim years that UTI is committed to paying.

This component is estimated at Rs 40 billion in the three years from now to the time that all the MIPs are paid off.

The MIP 97 had a committed redemption liability of Rs 13.77 billion as on March 31, 2002.

Against this, it has assets of Rs 8.80 billion, leading to a shortfall of Rs 4.97 billion. But, assets of Rs 3.68 billion will mature only after April 30, 2002, leading to an overall liquidity gap of Rs 8.65 billion.

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