SUUTI portfolio value falls Rs 20,000cr

The government has budgeted for a Rs 9,000 crore gain from the sale of shares with the Special Undertaking of UTI (SUUTI), which took over the assets and liabilities of the assured return schemes of the erstwhile Unit Trust of India.

But the gain will remain elusive for now, as the value of SUUTI's portfolio has dropped over Rs 20,000 crore since January due to the fall in stock prices of L&T, ITC and Axis Bank.

The value of the three investment has plummeted from a high of Rs 35,694 crore to Rs 15,518 crore since its January peak "" a period that saw the benchmark Sensex fall 26 per cent.

The three blue chip stocks came under SUUTI after the government split the troubled UTI in 2003. As per the plan, SUUTI is to exit the three strategic investment by April 2009.

"We are not looking at the Sensex to exit from the stocks. We do not track the daily stock movements," said K N Prithviraj, administrator of SUUTI. Prithviraj, who is former CMD of Oriental Bank of Commerce, refused to comment further.

SUUTI holds 9.11 per cent in L&T, nearly 12 per cent in ITC, and 27 per cent stake in Axis Bank.

L&T is now down 35 per cent from its January high of Rs 4,670, ITC Ltd is down 23 per cent from the January high of Rs 239 and Axis Bank is down 37.8 percent from the mid-January high of Rs 1,291. The shares are now trading at Rs 2,804.90, Rs 185 and Rs 802 respectively.

Sources said it was for the government to take a decision on exiting these blue chips and SUUTI is helpless in taking a decision on its own in this matter. The Sensex, which fell nearly 770 points on Thursday, is at around the lowest in last six months.

SUUTI was created after splitting the troubled UTI in February 2003 to handle the assured returns schemes including US-64. The other UTI, which is referred as UTI AMC, was asked to handle other schemes.

Sources said SUUTI was able to exit most of the other small and mid-cap stocks, cashing in on the three year bull-run. But, the three blue chips remained with SUUTI as government was not able to take a decision on how to exit the stocks.

"It could have exited either through a strategic sale or through open market operations. While open market sales have direct impact on the stock prices and liquidity, strategic stake sale would have fetched higher returns for SUUTI," said a source.

During the tech-bubble of 2001, the erstwhile Unit Trust of India was found to be holding equity stakes of several hundreds of companies, of which several of them had dubious reputation.

US-64, UTI's flagship scheme, was on the brink of collapse as stock prices crashed during that period, before the government bailout helped the mutual fund house to survive.

"In the last couple of years, we were able to exit from shares of more than hundred companies either through open market sale, or through direct sales back to the promoters. We now only hold some illiquid bonds, in addition to L&T, ITC Ltd and Axis Bank," said a source.

Even the mega UTI's headquarters in Bandra Kurla Complex, Mumbai, which was under SUUTI, was sold to UTI AMC for an undisclosed amount. Analysts estimate SUUTI may have received an amount well above Rs 200 crore through the sale.