The Specified Undertaking of the Unit Trust of India (SUUTI), the entity that took over the assured return schemes of the erstwhile Unit Trust of India (UTI) in 2002, is preparing to kick off the redemption process for the Rs 6,000 crore assured return scheme (ARS) bonds that mature in April next year.
SUUTI will fix the record date for the bonds by the end of this year and send mailers to the investors in January. It will also fix a record date for the bonds to stop trading, said a source. The bonds are traded on the National Stock Exchange (NSE).
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The liability of US-64 bonds was around Rs 8,000 crore, while the liability of ARS bonds is around Rs 6,000 crore. The coupon rate for the seven ARS bonds is 6.6 per cent.
The assured schemes in lieu of which these bonds were issued include Children Gift Growth Fund 1986 (CGGF-86), CGGF-99, Rajalaxmi Unit Plan 94 (RUP-94), RUP-99, MIP-98 (V), MIP-99 and Bhopal Gas Victims MIP-92.
Seven long-term ARS of SUUTI were foreclosed in April 2004. A total of 1.95 million investors, constituting 53 per cent of the total investor base, were paid cash aggregating Rs 5,525 crore, while 1.74 million investors opted for the 6.6 per cent ARS bonds having a face value of Rs 5,970 crore.
While the US-64 bonds were significantly backed by equities, the ARS portfolio comprises oil bonds, government securities and other bonds maturing in March 2009.
To meet the redemption pressures, SUUTI will not have to sell stake in its core holdings—L&T, Axis Bank and ITC, said a source.
Meanwhile, the redemption process for US-64 bonds that matured in May this year is nearly complete.
Only bonds worth Rs 1,200 crore or about 15 per cent are yet to be redeemed, said a source. These bonds will not earn any interest from June 1 this year.
