Unit Trust of India (UTI) is expected to give more emphasis on the management of its debt portfolio, especially the one under its flagship scheme US-64.
A separate team to manage the debt portfolio of US-64 is now on the anvil.
This follows the UTI's decision to reduce the equity exposure in US-64 from 66 per cent to 50 per cent over the next few years.
As on June 30, 1999, the debt portfolio of US-64 stood at Rs 5,300 crore, which is expected to go up to Rs 8,000 crore.
P S Subramanyam, chairman, UTI, said, "Full and undivided attention will be given to the debt portfolio of US-64. We also plan to take all possible measures to ensure this.".
Reliable sources indicate that a formal proposal for setting up a separate and dedicated fund management team for active administration of debt investments is under consideration with UTI.
In this regard, the trust has taken an in-principle decision to develop the secondary market for debt trading in the country. "We want to take the lead in developing the secondary market for debt trading in the country. And to meet this objective, we have sought help from the Asian Development Bank," Subramanyam said.
The implementation of the proposal is expected to benefit UTI in better management of its debt investments. However, Subramanyam did not elaborate on the detail plan of action which the trust wants to put in place.
This also assumes significance since the Deepak Parekh Committee set up to undertake a comprehensive review of the US-64 scheme had pegged the net non-performing asset level at Rs 413 crore, which is close to 10 per cent of the aggregate corporate debt portfolio.
At present there is no separate fund management team to look into the debt portfolio of US-64.
However, with UTI planning to cut the debt-equity ratio of the scheme to 50:50 over the next few years, the trust would have no choice than to lay more emphasis on the debt portfolio of the scheme.
At present, the total corpus of US-64 stands at Rs 16,000 crore on which nearly two-third is in equities and the remaining in debts. "We want to bring down this ratio in favour of debt but not by hurting the market in any way. Care will be taken to ensure that the sentiment of the market is not spoiled in the process," Subramanyam said.
On income distribution of 13.5 per cent announced by UTI under US-64, Subramanyam said the trust is confident of giving better returns to its investors next year. "We are hopeful that with a 11.4 per cent return on government securities (which was replaced with public sector unit stocks worth Rs 3,300 crore), UTI should be able to better the income distribution on US-64 next year," he added.
