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UTI in talks with SEBI on excess holding in cos

Dinesh Narayanan
Aparna Krishnan

MUMBAI, March 26

UNIT Trust of India (UTI) is in talks with Securities and Exchange Board of India (SEBI) to sort out the issue of `excess' holdings in certain companies.

SEBI's mutual fund regulation 44(1) says that "no mutual fund under all its schemes should own more than 10 per cent of any company's paid-up capital carrying voting rights".

UTI, through different schemes, holds more than 10 per cent in a few top companies such as ITC. Its holding in Reliance Industries (RIL) is set to cross the threshold after the proposed merger of Reliance Petroleum with RIL.

The public sector fund had no immediate plan or strategy to bring down those equity investments that individually amount to more than 10 per cent of the paid-up share capital of the respective companies, a top UTI official said. The official said the Trust was in dialogue with SEBI on working a way out, including a possible exemption.

UTI holdings could exceed the 10 per cent norm because it was not governed by SEBI until now. Even though the public sector fund is still not within the purview of the capital markets regulator, it voluntarily complies with SEBI norms except in the case of its flagship US-64 scheme, which would officially come under SEBI purview by the end of this calendar year.

Practically every UTI scheme, including US-64, holds shares in blue-chip companies such as ITC and Reliance.

According to Mr A.K. Sridhar, General Manager, Department of Fund Management, UTI, a sudden sale of shares is also not advisable because it would upset the market equilibrium. "We do not have any plans to immediately bring down the excess holdings," he said. That also set to rest the question how the holdings would be brought down — across the board or in select schemes.

Meanwhile, UTI is changing its marketing strategy. "We intend to focus on the high net worth individual. Post-Budget, the investment avenues have narrowed to such an extent that equity investments have become the most attractive. The beneficiaries, in terms of funds flow, to a large extent would be mutual funds," Mr Sridhar said.

He, however, said this does not necessarily mean an increase in advertisement budget or a marketing blitzkrieg. ``We cannot suddenly increase our ad budget. After all, the money has to come from the schemes. What we are doing is re-orienting the available budget to suit the shift in strategy. For example, we would buy more time on television but reduce hoarding displays, he said.

Mr Sridhar felt that in the short to medium-term, the equity market would definitely give more returns than the debt market. He said he was bullish on the petro, FMCG and pharma sectors. "The petroleum sector has performed really well. Even though largely driven by disinvestment, we feel that there is still value locked up in oil and petrochemical companies' shares," Mr Sridhar said.

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