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BUSINESS: UTI
Six Deadly Sins
In 1999, the Deepak Parekh Committee recommended six
major changes in the functioning of the UTI. However, not one of the following
suggestions was implemented.
RECOMMENDATIONS
1 Create a separate asset
management company for US-64 with an independent board of directors responsible
for overall supervision.
2 Composition of the US-64
portfolio needs to be changed to give more weightage to debt and reduce
its exposure to equity shares.
3 Convert US-64 into a
NAV-driven scheme by February 2002.
4 Strategic sale of holdings
in companies and invest proceeds in debt.
5 US-64 should be brought
under the purview of the Securities and Exchange Board of India at the
earliest.
6 US-64's investment decisions
should be handled by an independent fund manager with the sole responsibility
of overseeing investments and should be helped by solid research.
STATUS
1 No
change in structure since February 1999.
2 The problem has only
worsened. The proportion of debt has gone down from 37 per cent of the
corpus to only 28 per cent.
3 This could have been
done in June 2000 when the NAV was estimated to be close to Rs 14. But
UTI shied away citing inadequate infrastructure.
4 Not a single company
has been identified for a strategic sale of its equity.
5 Despite three earlier
attempts in 1992, 1994 and 1998, the regulator could not get UTI to comply
with this suggestion.
6 UTI continues to be
run from the chairman's office. UTI has invested in over 1,300 companies
but the research is restricted to only 300 companies.
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