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UTI may exit promoted companies

Janaki Krishnan & Rakesh P Sharma

The Unit Trust of India is looking at selling its holdings in companies it promotes or co-promotes, in order to generate more liquidity in its Development Reserve Fund.

At present, more than half of the DRF comprises such holdings, and UTI plans to liquidate assets in the fund to meet shortfalls.

The exercise was expected to net UTI Rs 6-7 billion, said senior UTI officials.

UTI's DRF currently has assets worth Rs 9 billion, of which around Rs 6 billion is in the form of holdings in organisations it promotes.

The trust is looking at selling either part of its stake or its entire stakes in entities it promotes to a new investor. These include UTI Investor Advisory Services, UTI Institute of Capital Markets, UTI Investor Services Ltd, UTI Securities Exchange and UTI Bank.

UTI is already talks with IL&FS, Crisil, the Stock Holding Corporation, the Over the Counter Exchange of India and National Securities Depository Ltd, all of which it co-promotes, and has asked the other promoters to buy its stakes in them. In cases where the organisations are not listed, UTI's stake will be sold at a negotiated price.

The exercise, apart from shoring up its DRF, has also to be looked at against the backdrop of UTI's initiative to turn itself into a typical asset management company, functioning under the Securities and Exchange Board of India's mutual fund regulations.

Getting rid of its status as the promoter of various entities, and focusing on its core business of managing investors' funds, was the ultimate aim, sources said.

UTI recently dipped into its DRF to make up the shortfall in its monthly income plan (MIP) 97 (I), which came to around Rs 6 billion.

At the end of June, MIP 97 (II) and the Institutional Investors' Special Fund Unit Scheme 1997 will be maturing. MIP 97 has an estimated shortfall of Rs 7-8 billion. The institutional scheme has a corpus of Rs 7 billion, and the estimated shortfall is around Rs 2-2.5 billion.

The DRF is built by contributions from various UTI schemes. The fund is mainly invested in equity shares of companies promoted and co-promoted by the trust.

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