UTI Bank majority investment stuck in KP stocks

Mukta Malhotra

Mumbai, Aug 8: The infamous KP stocks, said to be favourites of disgraced bull operator Ketan Parekh (KP), had lured even the UTI Bank, promoted by Unit Trust of India, which too had invested in these stocks.

In the ongoing and overall market slide, these stocks have lost sizeable value over the past few months, but UTI Bank is said to have been stuck with majority of its investments in these stocks, the market price of which have fallen by 90-95 per cent from their peak level in early 2000.

While the UTI’s various funds which had invested in these stocks have been impacted with erosion in their respective net asset values (NAVs) due to its investment in these stocks, UTI Bank’s investments too seem to have gone sour, observers say.

Of the total KP stocks, UTI Bank’s holding in early March 2001, was said to have concentrated on three stocks — Pentamedia Graphics (70,000 shares) Silverline Technologies (70,000 shares) and SSI Ltd (14,000 shares).

Further, as per the data made available by Investor Grievances Forum, out of the ten KP scrips, barring the promoter of these companies, UTI, is the top shareholder in Aftek Infosys, Global Tele, Pentamedia Graphics, SSI Ltd, HFCL and Satyam Computers.

UTI, through its various schemes, too had bought KP shares through its schemes like SUS-99, UTI India Growth Fund and UTI Media Internet Fund. Through UTI Media Internet Fund, UTI has bought 92,200 shares of Pentamedia Graphics.

Interestingly, IGF has come out with a solution which could prop up UTI’s NAV, as well as benefit small investors. In the interest of small investors, IGF in a written communication to the Securities and Exchange Board of India (Sebi) and ministry of finance (MoF), has demanded that the former should initiate price rigging and insider trading enquiry against promoters of the companies where KP invested heavily in and where UTI has substantial investments.

Section 11 (G) & 24 of Sebi Act, empower Sebi to probe into any company where prima facie it seems that price rigging or circular trading is done. The Act also allows Sebi to penalise promoters if anything is established against them .

By exercising the power, like in the case of Cyberspace and Amar Raja Batteries where a case of price rigging was established and Sebi had directed the exchange to reverse the transactions, Sebi should direct the promoter of these companies to annul transactions and give back the money to UTI, says an IGF source.

This would increase the NAV of the schemes of UTI through which it has made imvestments in KP scrips. With the increase in NAV of the scheme, small investors of the scheme would also get back their money. IGF maintains that if price rigging is found, then the MoF should direct Sebi to do the needful in co-relation with the department of company affairs.

However, they maintain that this action should not only be taken in case of UTI, but other mutual funds as well, so that small investors who have invested in the schemes of other mutual funds could also benefit. Not only that, the action would also bring an end to the promoter-broker-fund manager nexus on price rigging.