The optimism stems from the fact that a large number of investors would not be keen to dematerialise small lots of their holdings by undertaking the process of opening an account. There would be several others who may not be able to avail of the depository services owing to lack of spread of the depository network, feels GIC Mutual Fund.

Initially, GIC Mutual Fund will accept physical shares of only 70 scrips, the total market capitalisation of which is about Rs 2 lakh crore. The fund expects to garner a quarter of a percentage of this amount which works out to Rs 500 crore, said AR Prabhu, chief executive officer of GIC Asset Management.

GIC AMC has filed the papers for the scheme with Sebi on December 19, where it has outlined the details of the working of the scheme which will be the first of its kind.

According toPrabhu, the idea is to give a chance to the small investor to submit his physical shares to GIC MF, which in turn will allot units of the same value to the investor. GIC MF will then dematerialise the shares and these shares would be the Fund's investment in that particular scrip.

The price at which GIC MF would buy the scrips would be the average price of five trading days of the particular scrip so as to avoid any manipulation. "We will keep on upgrading this list of 70 companies by including some and exiting from some. At the end of it all we will restrict ourselves to about 30 scrips. We will guage the demand from the market before deciding which scrips to extend our scheme to and which not", said Prabhu.

The GIC group which has a sales force of 18,000 people will utilise the services of close to 3,000 people for marketing the demat scheme. "We are also going to employ the services of 5-6 non-banking finance companies (NBFCs) to market our product", added Prabhu.

"The demat scheme will work in thefollowing manner. An owner of physical shares, which are part of the 70 companies recognised by GIC mutual fund, would submit these shares to the GIC demat scheme and the mutual fund would in turn issue equivalent units at a face value of Rs 10 to the investor. The scheme will be NAV driven and a person who wants to repurchase would do so at the prevalent NAV of the scheme", said Prabhu.

The mutual fund has employed the services of HDFC Bank which is also a depository participant with the National Securities Depository Ltd as its custodian for the demat scheme and Karvy Consultants as their registrars.GIC mutual fund at the begining of the fiscal 1998-99 had set a target of mobilising Rs 500 crore. This would lead to a substantial increase of 50 per cent in the mutual fund's corpus to Rs 1,500 crore from the present Rs 1,000 crore. The current equity corpus of the mutual fund is close to Rs 375 crore.