New Delhi, July 1: Ind Moti is the first scheme in the history of mutual funds to be redeemed below par. The closed-end growth scheme from Indian Bank Mutual Fund was redeemed on June 30 at a net asset value of Rs 7.76. Thus, investors will incur a capital loss of Rs 2.24 per unit.

With a unit capital of Rs 67.66 crore, the redemption cost works out to Rs 52.45 crore. However, there will be no outflow of capital from Indbank Mutual Fund as the fund had not promised a fixed redemption price for Ind Moti units. The fund had offered the option of redemption/rollover to its unitholders and only 15 per cent of the unitholders opted for rollover.

According to sources, Ind Moti started restructuring its portfolio with an orientation towards large-cap stocks in event of a rollover. The mutual fund industry had earlier anticipated redemption of Tarus Newshare below par. However, the scheme succeeded in securing the mandate of the unitholders for a rollover.

Ind Moti's NAV stood at Rs 14.83 in March 1994. Since then, it declined steadily to Rs 13.44 in March 1995 and Rs 10.02 in March 1996. The fund, launched prior to the bull run in 1992, fared well in the initial years and paid dividends of 15 per cent, 18 per cent and 21 per cent in 1993, 1994 and 1995, respectively. ``To maintain such high payouts, the fund compromised on its portfolio content and liquidated good stocks to honour commitments,'' says a fund analyst. In March 1995, the fund's top ten holdings included Nahar Spinning, Nova Iron , Balaji Ind, Tube Investments, Raymond, Bajaj Auto and IPCL. Ind Moti also took exposure to IPOs during the primary market boom of 1993-94. After liberal payouts till 1995, the fund skipped dividend for fiscals1996 and 1997.

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