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BUSINESS: UTI
All Norms Bypassed
In his first interaction
with the UTI staff, many of whom are top-notch financial professionals,
Damodaran told them what he wanted them to do: "Professionalise your
work place." The implicit criticism in the remark of the style of
his predecessor P.S. Subramanyam could not have escaped the notice of
UTI insiders. Under the controversial chief, investment decisions were
all his. The committee of trustees for collective decision-making was
routinely bypassed and the staff responsible for equity research turned
as ineffectual as students in tutorial classes.
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HALL OF FAME
Men at the helm of UTI over the years
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R. S. BHATT
Former Naik Dewan of Bhavnagar was close to BSE founder family and
was MD of Maharashtra Fin. Corp
Size of Fund: Not available
JAMES RAJ
The ICICI deputy GM was close to H.T. Parekh, MD of Industrial Investment
Trust.
Size of Fund: 189 crore
G. S. PATEL
Son of a Fiji solicitor, he started his career in the insurance
sector and worked for GIC.
Size of Fund: 3,000 crore
M. J. PHERWANI
A Karachi graduate, he came to India in the 1960s. He also worked
for GIC.
Size of Fund: 20,000 crore
S. A. DAVE
Former IDBI and SEBI chief. A regulator turned player, who heads
the PF and pension panel.
Size of Fund: 70,000 crore
J. CAPOOR
An RBI official who headed UTI for 10 months before returning to
RBI as deputy governor.
Size of Fund: Not computed
G. P. GUPTA
The ex-IDBI chief's brief tenure is remembered for the high dividends
declared.
Size of Fund: 60,000 crore
P. S. SUBRAMANYAM
Another IDBI chief, who was asked to leave seven months before end
of tenure; sacked from UTI
Size of Fund: 65,000 crore
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Damodaran has a clear idea of his own role as
the CEO. It, he says, will be to "stay away from investment decisions"
and to leave these in the hands of "a group of professionals".
The CEO, according to him, will confine his job to make sure that "the
investments don't go out of line with the overall philosophy of the organisation,
which promises safe returns to the ordinary investor". His task is
to restructure the fund into a mix of schemes, the "sub-units"
as he calls them, with varying degrees of risk. But he is determined to
correct their "equity overhang", particularly that of US-64,
the flagship scheme, where the current debt/equity ratio is exactly the
opposite of the 1998 Deepak Parekh Committee's recommendation of 70:30.
How will he reduce the load of equity on US-64?
Damodaran's prescription is three-fold: pledging shares with banks to
raise capital, trading shares with banks and opening a line of bank credit
without any collateral. The funds are all tied up to finance repurchase
of US-64 from August 1. Though in his first week in the job, Damodaran
is bullish on UTI's 87 schemes in operation, particularly US-64 which
he hopes will regain its past glory by January next year, when it becomes
net asset value (NAV)-driven. The investor will then have an option to
sell it back to the trust either at the stipulated price or at the NAV.
When Damodaran's name appeared in the newspapers,
there were many who believed that he would turn out to be another Bhure
Lal, a severe enforcement director who was responsible for the label "raid
raj" bestowed on V.P. Singh's finance ministership (1986-87). The
apprehensions are utterly misplaced as Damodaran is not a policeman but
a change agent with a clear agenda to make UTI regain the confidence of
the small investor as a safe place to park his savings. As for the corporate
fat cats, let them be left to their own devices.
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