The Unit Trust of India (UTI) made fresh investments of Rs 166.4 crore in companies where existing investments were classified as non-performing assets (NPAs).
The Tarapore Committee, which had made a random check on the investments in debt instruments by the UTI, noted that in eight cases the mutual fund had taken fresh exposures in companies which had already defaulted on payment.
In seven of these companies -- including Malvika Steel, Usha Ispat, SJK Steel Corp, Prag Bosimi Synthetics, SIV Industries, and SVC Superchem -- the investments were sanctioned by the executive committee.
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UTI made additional investments of Rs 71 crore in unrated non-convertible debentures of Malvika Steel on November 11, 1999.
This investment was made even as the UTI had on June 30,1999, made a provision of Rs 51.86 crore against the total cost of Rs 206.01 crore.
The UTI had, as on June 30, 2001, made a provision of Rs 169.41 crore against the total cost of Rs 289.56 crore. An investment of Rs 12.13 crore was made by UTI in Usha Ispat in unrated NCDs and the amount was disbursed on June 26, 2000.
However, as on June 30, 1999 UTI made a provision of Rs 27.60 crore against the total cost of Rs 92.19 crore.
As on June 30, 2001, UTI made a provision of Rs 126.61 crore -- Rs 27.01 crore for the interest and Rs 99.60 crore for investments.
These provisions were made against a total cost of Rs 123.4 crore.
The Tarapore Committee has also observed that certain investments had gone into default within a short period of their sanction. This the report stated "is indicative of possible deficiencies in the investment taking process".
The total investments by UTI in such companies according to the committee stood at Rs 451.17 crore between 1999 to early 2001.
Some of these companies where the investments had become NPAs soon after sanctioning included Balaji Distilleries, Welspun India, Welspun Syntex, and Deepak Fertilisers and Petrochemicals.
Also certain investments in debt instruments were made in companies which had earlier been classified as NPAs as on June 30,1999.
These accounts did not figure as NPAs as on June 30, 2000, or appeared with reduced provision. However, they re-appeared in the next year as an NPA as on June 30,2001. The committee has said that these cases "are perhaps indicative of the practice of evergreening."