New Delhi, Apr 12: The latest monthly income plan from Unit Trust of India, which opened on April 5, is attracting large-ticket investors in hordes. With a tax-free yield of 10.75 per cent, MIP has emerged as a superior alternative to the Reserve Bank of India's tax-free relief bonds, which offer a coupon of only 9 per cent. As a result, investments are flowing into MIP `99 instead of RBI bonds. According to UTI officials, collections in the fund have already touched the Rs 300-crore mark. ``In this kind of an interest rate scenario, a tax-free yield of 10.75 per cent has made MIP very attractive. Lots of big money is also coming from high networth individuals who have booked profits during the post-budget rally on the bourses and are locking money under section 54EA,'' said a market source.With money pouring in the scheme and UTI setting a collection target of Rs 1000 crore (as reportedly asked by Sebi), market sources point out that allotments will be made on a pro-rata basis. This has further fuelledinvestments in MIP '99. ``Investors want allotment on at least some portion of their invested money and hence, they are putting in big applications,'' said intermediaries, marketing the issue. ``There is also a talk in the market that UTI may reject some big applications,'' they added. However, this could not be confirmed with UTI officials.
The offer document of MIP '99 states that UTI will give preference to applications of less than Rs 50,000. Thus, investors are breaking their total investible money into several applications of less than Rs 50,000 in order to get a firm allotment of MIP units. ``With probability of a firm allotment higher, an applicant with say, Rs 5 lakh, is breaking this investment into 10 applications of Rs 50,000 each. There are investors, who are putting a much larger sum in the scheme in the form of multiple applications,'' said a market source. However, if multiple applications continue to come in bulk, intermediaries point out that UTI's registrars will be in a soup, identifyingthese multiple applications. Worse, servicing these applicants will be a Herculean task.
UTI officials said they might be allowed to retain a certain percentage of the oversubscribed investment, subject to Sebi's approval. ``We will be allowed to retain some portion of the oversubscribed money only if Sebi permits us. This will help some more investors get firm allotment,'' said an official.
With pressure mounting on UTI to do away with assured return plans, investors also feel that this is possibly the last assured-return MIP from UTI.
``Going by the response from big investors, the Deepak Parekh committee has rightly pointed out that UTI has been promoting assured return schemes for the benefit of institutional investors. After this plan, pressure is likely to increase on UTI to put an end to assured return plans from the regulators and the finance ministry,'' said an analyst.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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