The price of the unit is likely to see a further spurt as the book closure of the scheme is scheduled on September 9. Around 3.03 crore units are still outstanding and this shows that a sizeable number of investors are still holding on to Canstar units.

In fact, those investors who had not sold units at a repurchase price of Rs 23 in 1997 are now all set to gain. Canara Bank, the sponsor of Canbank Mutual Fund, had bought back 95 per cent of Canstar units with a one-time offer at Rs 23 in 1997. The annualised yield works out to 14.85 per cent for an unitholder, who has stayed invested in the fund and will redeem units at Rs 40.

However, for those original unitholders who had opted for a repurchase price of Rs 23, the yield worked out to only 12.61 per cent. It may be recalled that Canara Bank had announced the repurchase price at Rs 23 which was lower by Rs 3.5 compared with the stated repurchase of Rs 26.5 in the offer document. The AMC had, in fact, suspended the repurchase of units and as a gesture of goodwill, sponsor Canara Bank had offered to buy back units at a lower price. This had also created some panic among investors and as a result, investors responded overwhelmingly. Nevertheless, the prevailing NAV was around Rs 11 against the repurchase price of Rs 23. In 1996, as the NAV of the fund had fallen substantially below the stated repurchase price of 23, the AMC could not honour the assured price and had suspended repurchase of units.

At present, Canara Bank holds almost 95 per cent of the fund's unit capital of Rs 607 crore. Canara Bank had to fork out Rs 1327.5 crore for buying the units at Rs 23. Total liability of the bank is likely to be around Rs 1449 crore, according to a fund analyst. Canstar was launched as a 10-year balanced fund in 1990 with repurchase at a stated price after three years. The repurchase price was to be revised every year. The fund provided liquidity thanks to its listing on the major stock exchanges of the country.