MUMBAI, February 23: LIC Mutual Fund has mopped up Rs 40 crore through Dhanvarsha (11). This is much lower than its target of Rs 150 crore. The initial offer closed on February 20.However, LIC sources said that this was quite a good response considering that other funds like UTI and SBI and also the Flexibonds issue of IDBI were in the market at the same time.
LIC had launched Dhanvarsha (11), a close-ended scheme, in mid-January. This was around the same time that the Reserve Bank had announced the increase in the bank rate by 2 per cent and cash reserve ration (CRR) by 0.5 per cent along with a host of other measures to shore up the value of the rupee.
Expectations of a relatively higher return from the forthcoming ICICI bond issue has dampened investor response to assured-return schemes. This has been clearly evident in the response of investors to IDBI's Flexibond issue and the current assured-return schemes of UTI -- MIP 1998 and SBI Mutual Fund's MMIS 1998. Dhanvarsha (11) is a close-ended incomescheme assuring a 12.5 per cent return for the first year. For the first year the scheme will have a minimum target return of 11.88 per cent payable monthly or 12.5 per cent payable annually. The scheme has a duration of five years. Investments have a lock-in period of one year only.
The asset management company is guaranteeing the return one year at a time. The income rates for the subsequent years will be declared at the beginning of each such year and this will take into account the earnings of the fund during the previous year.
The current collections by the fund are much above the very conservative target of Rs 10 crore put forth in the offer document of the scheme, but the fund was clearly expecting to mop up much more. The funds will be invested at higher rates considering the current interest rate situation, and this is expected to benefit the investors. Thus, the investor will get the benefit of assured returns promised by the scheme and also the higher earnings of the fund will be reflected inthe net asset value (NAV) of the scheme.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
