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US-64: Brand goes bust

S. Murlidharan

THE Unit Trust of India is at it again. Last year it betrayed young girls when it announced the closure of its much-vaunted Rajalakshmi scheme. This time round, its victims are a motley mix of investment savvy corporates, senior citizens, yuppies on the fast-track and others who naively believed that the UTI would not back out of its commitments to them under its flagship Unit scheme-1964.

While its reason for the grand betrayal last year was a dramatic southward movement in interest rates, striking at the very roots of the scheme whose main attraction for the girl child was the attractive 21 per cent per annum yield, this time round the U TI has done in its US-64 investors by sticking to the redemption and offer of these units not on the basis of net asset value (NAV) like any other open-ended scheme, but based on convoluted and opaque pricing. It lost an opportunity to switch to the NAV- based valuation for fresh offers and redemption when providence favoured it, that is, when its investment in the ICE shares rose to dizzy heights, giving the NAV of the US-64 scheme not only respectability but strength as well.

Now it has suspended redemption and sale for six months, thus pulling from under the investors' feet their only avenue of exit from the scheme, unless of course, they reconcile themselves to selling their units as a debt instrument in the National Stock Exchange. Like rats leaping off a sinking ship, many investors rushed to redeem their investments. In hindsight, this boomeranged on them, as this was the last straw on the camel's back. Ironically, this also precipitated the untimely suspension of the s cheme itself.

Hopefully, the UTI will use these six months to set its house in order. It has announced that it will make a strategic sale of its investments in equities of public sector undertakings. This has to be taken with a pinch of salt because being a handmaiden of the government, the UTI cannot possibly go it alone but will have to fall in line with the Government's disinvestment programme. Unless the Government also hastens disinvestment in the units in which the US-64 funds are locked, the UTI cannot make mu ch headway on this front. It may have to sell the real-estate that forms a small portion of the investments of the US-64, but realisations from which may be sizeable at the current prices.

Apart from these, there is not much else it can do. It no longer has a stranglehold on the share market. It has been relegated to the fringes by the foreign institutional investors (FIIs) who have been operating in the secondary markets with strength in terms of numbers and their deep pockets. There has been talk of regaining its past popularity, if not glory, by building its brand. But to the shell-shocked investors, this must have come as a comic relief. The UTI and brand? To be sure, a brand can be b uilt only if there is the prospect of customer loyalty. The UTI today is devoid of any customer support. It has left them high and dry.

Any attempt to woo them will not only come unstuck, but may prove counter-productive. Angry investors may launch a counter-campaign. At any rate, what will be the sales pitch of the UTI? An investment outfit stands on the tripod of reliability, profitabi lity and sensitivity to the needs of the investors. The UTI cannot stand on any of these. In the event, aside from exciting anger, its brand-building will also bring another negative emotion to the fore -- derision.

Celebrities, if they are the ones the UTI is banking on in the proposed exercise will, of course, laugh all their way to bank. But neither a swinging cine-star nor a flamboyant cricketer can restore the faith of angry investors or bring to the UTI's fold the neo-converts. The UTI has to hard-sell its schemes to demanding and investment savvy adults who are in no mood to be humoured. Let it not be under the illusion that the mantra of brand will deliver it out of its predicament. Brand is a double-edged weapon. When the tide is in your favour, it is an asset. But if the tide is against you, brand will be a liability, for, in that event, customers, actual and potential, bristle at the very mention of it.

(The author is a New Delhi-based chartered accountant.)

Pic.: By the simple expedient of closing the window, the UTI has avoided a run, but the 1998 days when investors crowded the UTI office in Mumbai to redeem their units is still fresh in the people's mind.

Picture by Paul Noronha