NEW DELHI, February 19: Indbank Mutual Fund has approached its parent, Indian Bank, to bail it out from the forthcoming redemption of the Ind Jyothi scheme. The scheme, which is coming up for redemption next month, is facing an estimated shortfall of Rs 56 crore.The cumulative and income plans of the scheme are to be redeemed at Rs 10 and Rs 31.20, respectively after a final dividend payout of 15.25 per cent. Based on the current net asset values (NAV) of Rs 9.55 and Rs 22.41, respectively, the gap is likely to be in the range of Rs 56 crore. The shortfall in Plan B (at the NAV on February 6) is Rs 8.79 while the gap in Plan A (after accounting for dividend payouts of 14.75 per cent and 15.25 per cent) is Rs 3.44. The scheme has also not paid the dividend of 14.75 per cent for 1996-97. While Plan A (income scheme) has a unit capital of Rs 47 crore, Plan B has a capital of Rs 46 crore. Since the asset management company, IndFund Management has a net worth of only a little over Rs 11 crore, Indian Bank willhave to step in to bail out the beleaguered mutual fund.
According to sources, the bank is taking steps in consultation with the Reserve Bank of India to bridge the shortfall. Repeated attempts to contact the managing director of Indian Bank and the chief executive officer of IndBank MF proved futile.
Launched as an income fund, Ind Jyothi mobilised an initial subscription of Rs 185 crore with an initial investor base of around 93,000. The units of both the plans are listed on the Bombay Stock Exchange and are also repurchased. The repurchase is, however, linked to the NAV.
The scheme deviated from its investment strategy and maintained a substantial exposure in equities. Although it paid a higher than promised dividend for the first four years, Ind Jyothi was caught in the 1994 initial public offering (IPO) boom and paid a part of the dividend of 14.75 per cent for 1996 out of its capital. Thus, while the debt component has given good returns, the equity portfolio has been a drag on the scheme'searnings. Interestingly, the fund declares only its top 10 equity holdings. As on March 31, 1997, the top holdings were Tisco, Lloyds Steel, Nova Iron, Nova Steel, ACC, Grasim, Satyam Cement, Satnam Overseas, RIL and Larsen & Toubro.
The fund paid a dividend of 17 per cent, 18 per cent, 19 per cent and 20 per cent against a promised return of 12.75 per cent, 13.25 per cent, 13.75 per cent and 14.25 per cent for 1992, 1993, 1994 and 1995, respectively.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
