New Delhi, Feb 1: One of the biggest assured return schemes, BoI DoubleSquare Plus, has managed to bridge the gap between its performance andpromise substantially. The net asset value of the fund is now just Rs 3short of the assured redemption price of Rs 400. The fund, which comes forredemption in August this year, has a net asset value of Rs 396.98 as onJanuary 25, 2000. In fact, the NAV had touched an all-time high of Rs 398.15on January 5, 2000. In the last one year, the NAV of the fund has vaulted bya little over 93 per cent from Rs 205.23 on January 27, 1999 to currentlevels.The market price of BoI units, which has traditionally been at a premium tothe NAV, is now trailing the same by around 12 per cent. While the NAV is atRs 396.98, the units are trading around Rs 350 on the bourses.
Based on the scheme's last available unit capital of Rs 351.45 crore, thegap of Rs 3 per unit translates into a shortfall of only Rs 10 crore. On a rough estimate, the fund has a current asset base of Rs 1395 crorewhile it has to achieve a size of Rs 1405 crore to meet the redemption priceof Rs 400 per unit. Even six months ago in August, 1999, the NAV of thescheme was hovering around Rs 300, resulting in a gap of Rs 100 unit or Rs351 crore.
``The rally on the bourses and churning of the portfolio has helped the AMCwipe out the deficit. What is important is that the scheme has over 4 lakhinvestors. Once these investors are paid the assured money without Bank ofIndia being forced to bail out its AMC, it will add to investors' growingconfidence in the fund industry,'' says a mutual fund analyst.
The investors are now expected to re-rate the Bank of India scrip, which hasbeen trading around its 52-week low of Rs 18 on the Bombay Stock Exchange.The scrip has a 52-week high of Rs 27. ``With the bank unlikely to face anyliability now on account of BoI Double Square Plus, the scrip is expectedto see some upward movement. The bank would have been forced to bail out theAMC in the event of a substantial shortfall and this would have impacted thesentiment at the counter,'' says a fund manager. For the year ended March31, 1999, BoI had seen its net profit fall by 45 per cent to Rs 201 crore.
Fund analysts point out that the AMC is now expected to liquidate a largepart of its portfolio and put the money in money markets to minimise theimpact of any fall in the equity markets.
``With the NAV now around Rs 400-levels, the AMC is now expected to giveinvestors the option of either exiting the fund at Rs 400 or stay invested.Hence, the fund could either be rolled-over or made open-end since its thebiggest fund in the BoI stable,'' says an analyst.
Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.