The fresh fund infusion is over and above the Rs 500 crore already committed in the supplementary demand for grants recently approved by the Indian parliament. UTI was provided Rs 500 crore to make good the shortfall between the assured repurchase price and the net asset value of the US64 scheme.

The government had earlier extended a Rs 1,000-crore guarantee to UTI to help bride the deficit in the assured return schemes, which were up for redemption in June 2002 and the MIP due for redemption this month.

The total package for UTI is around Rs 5,000 crore, but we are yet to decide on the manner in which it would be funded, says a UTI official.

Damodaran, meanwhile, gives a firm assurance of meeting all the commitments made to its investors. He says the current initiatives taken by the trust with adequate government support would help in restoring market confidence, which, he says, would attract a fresh breed of investors to its various funds.

Damodaran feels that the fresh investments would flow in through a new generation of investors who have a larger appetite for taking risks, apart from the institutional investors, forming the bulk of the inflow into different new schemes in keeping with the times.

To be or not to be
Damodaran nevertheless says that a large part of the retail investors might stay away in the short run in view of the lack of confidence in the market. The retail investor will come back only if he has a little more confidence than he has at this point of time. He has to be clear that he is investing in a market in which he can get returns over a period of time.

UTI has, for the first time, attempted to protect the capital of investments on which the returns were not guaranteed, as in the case of MIP95. This would be done by periodic payments that would be made against the recoveries made under the scheme.

In the case of UTIs flagship scheme US64, the trust expects that not many investors would exit from it on 31 May 2003, when the administered redemption scheme comes to an end.

We will have to wait till May 2003 to see whether that happens. This can happen only if UTI clean up its stables, stays clear from political interference in the future, and professionalise the operation of the funds.