February 27: SBI Magnum Triple Plus trades at a 37.8 per cent premium to its net asset value of Rs 174.16. However, the premium is not based on the fund's performance but its redemption at Rs 300 in May, 1999. More than six years after its launch, the fund has appreciated by an average annual rate of mere 9.21 per cent. Now, the fund is faced with a rather Herculean task to appreciate by 72.26 per cent in the last fifteen months of its tenure to honour redemption at Rs 300. This is equivalent to its growth figure of 74.16 per cent in the first seventy five months.The high market price of Rs 240 is mainly due to the assumption that the Rs 44.79 crore asset management company, SBI Fund Management will honour its promise. In case the fund manages to hold on to its present NAV, the AMC would still face a shortfall of Rs 235.55 crore (based on the September, 1997 unit capital of Rs 187.18 crore). Unless the State Bank of India decides to bail out its subsidiary, the AMC will be hard pressed to honour itscommitment.
Magnum Triple Plus is a closed-end scheme aiming at capital appreciation through cumulation of income and capital growth. It was launched in October, 1991 in the run up to the stock scam, and collected a fairly large corpus of Rs 207.46 crore with the BSE Sensitive Index at 1890 and the BSE National Index at 888 points. Liquidity is available through repurchase and listing on the BSE.
SBI Magnum Triple Plus, an income cum growth scheme from SBI Mutual Fund, is now one of the three schemes (besides Ind Jyoti and BOI Double Square Plus) in a a tight corner in recent times. All the three funds are trading at a premium to their NAVs.
Magnum Triple Plus had assured minimum repurchase prices on a rising scale from Rs 152 per unit for 1994-95 to Rs 175 for 1995-96, Rs 202 for 1996-97, Rs 233 for 1997-98 and Rs 270 for 1998-99. Up to March 1995, the scheme's NAV matched up to the level of promised returns. In 1994-95, the fund had repurchased the units at Rs 160 against the indicated price of Rs 152per unit.
However, the steep decline in the stock markets has had a dampening effect on the returns in the recent past. As against the promised repurchase price of Rs 233, the fund is buying back units at Rs 170.05 (February repurchase price).
The fund has more or less been able to keep pace with the market. As against a compounded growth of 12.47 per cent in the National Index, the fund has grown by 9.21 per cent since launch. However, the growth is way below the promised annual appreciation of 13.24 per cent.
With a an option to invest upto 40 per cent of corpus in debt, the fund was expected to perform better in recent times. On the contrary, its NAV has declined by 13 per cent in last three months. Moreover, the fund had the benefit of two major stock market rallies during its tenure so far.
In Magnum Triple Plus, the fund managers have not been able to turn in the minimum promised return of 13.24 per cent per annum so far. Significantly, this is also the promised growth rate of the SBI Mutualfund's latest offering, Magnum Monthly Income Scheme '98 although MMIS has promised a lower equity exposure of 20 per cent.
SBI Mutual Fund has somehow been able to postpone the crisis that is building up. Unlike Canstar and Big Value, Magnum Triple has been able to escape the embarrassment on two pleas : one, at one point it did repurchase at an NAV related price which was above the promised minimum repurchase price and second, the fund claims that its will honour the promise of assured terminal value in 1999.
6-- Value Research
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
