NEW DELHI, March 3: SBI Mutual Fund's Magnum Monthly Income Scheme '98 (MMIS '98), which closes for subscription on March 4, is likely to mop up around Rs 50-60 crore. Although estimated collections match the target amount of Rs 50 crore mentioned in the prospectus, the fund management had plans to rope in around Rs 300 crore.MMIS '98, with a tenure of five years, remained open for almost a month. The scheme offered an assured return for five years at 12.5 per cent per annum (payable monthly), which translates into an yield of 13.24 per cent.
However, collections were first hit by IDBI's Flexibond III issue, which incidentally also offered a return of 12.5 per cent, payable monthly or 13.25 per cent on an annual basis in the case of its Regular Income Bond. But, it was the financial institution's Growing Interest and Infrastructure Bonds which were a hit among retail investors.
Further, the decision of ICICI to offer interest rates in the range of 13.25 to 14 per cent on a quarterly, half-yearly andyearly basis further stemmed the flow of funds to MMIS '98. Market sources point out that it was in fact ICICI's attractive coupon which hampered collections in both MMIS and IDBI.
IDBI, for the first time in its Flexibond series, could not completely exercise the green-shoe option of Rs 750 crore and ended with a collection of Rs 950 crore. This was despite the fact that it had revised the interest rate on two of its bonds.
The sudden rise in interest rates in mid-January on account of RBI's measures to stem the fall in the rupee caught a large number of players unawares.
In fact, LIC Mutual Fund's Dhanvarsha 11 was the first victim. The scheme offered an assured return of 11.88 per cent (12.5 per cent on an annualised basis) and managed a subscription of about Rs 35-40 crore against a target of Rs 150 crore owing to a higher coupon for the IDBI Flexibonds issue.According to market sources, the ICICI issue has also affected the montly income plan of the Unit Trust of India.
The mutual fund behemothis offering a coupon of 12.5 per cent under its monthly plan or 13.24 per cent, payable on an annual basis. The Magnum Monthly Income Scheme was available in monthly, quarterly, annual and cumulative income options. The scheme also had a provision for exemption from capital-gains tax under section 54 EA if the funds were locked in for a minimum of three years.
SBI Mutual Fund had earlier launched MMIS in April, 1997 and promised monthly income at the rate of 15 per cent for the first year. The fund had mobilised around Rs 61.97 crore in the scheme. The latest NAV of the scheme is Rs 9.86.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
