The US-64 Controversy

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Case Details:

Case Code : FINC003
Case Length : 8 Pages
Period : 1990 - 2000
Pub. Date : 2002
Teaching Note : Available
Organization : UTI India
Industry : Financial Services
Countries : India

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Restoring the Trust

UTI realised that it had become compulsory to restructure US-64's portfolio and review its asset allocation policy.

In October 1998, UTI constituted a committee under the chairmanship of Deepak Parekh, chairman, HDFC bank, to review the working of scheme and to recommend measures for bringing in more transparency and accountability in working of the scheme.

US-64's portfolio restructuring however was not as easy as market watchers deemed it to be.

UTI could not freely offload the poor performing PSU stocks bought under the GoI disinvestment program, due to the fear of massive price erosions after such offloading. After much deliberation, a new scheme called SUS-99 was launched...

Dead End Scheme?

Though UTI started announcing the dividends according to the market conditions, this was not received well by the investors.

They felt that though the dividend was tax-free, it was not appealing as most of the investors were senior citizens and they did not come under the tax bracket. The statement in media by UTI chairman that trust would try to attract the corporate investors into the scheme was against the recommendation by the committee, which had adviced the trust to attract the retail investors into the scheme. This led to doubts about UTI's commitment towards the revival of the scheme. However, led by improving NAV figures and image-building exercises on UTI's part, by 2000, US-64 was again termed as one of the best investment avenues by analysts and market researchers...


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