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ICE meltdown may be hot potato for US-64

B G Shirsat

The Unit Trust of India, which had embraced the tech boom with characteristic vigour, may finally end up a loser at the end of its accounting year ending June 30. With the tech meltdown gathering momentum in the recent period, the net asset value of US-64 units is probably less than Rs 10 now.

Preliminary calculations suggest that the total market value of its investments, which just about covered its outstanding unit capital in December 2000, should have depleted in the January-March 2001 quarter to below par values.

By end December 2000, according to a published abridged balance sheet of the fund, the total market value of the fund's investments was Rs 173.02 billion whereas its outstanding unit capital was Rs 159.93 billion.

Even if the fund is said to be tracking the Sensex on a one-to-one basis, on a conservative estimate, the market value of its investments should have fallen 19.8 per cent, reducing the market value of its investments by approximately Rs 19.70 billion to Rs 153.32 billion, which could be less than its unit capital. This calculation takes into account the stated equity-debt breakup in the fund's investments at 60:40.

That is, the depreciation has been worked out on only 60 per cent of its quoted marketable investments.

While this is a very conservative estimate, the fact remains that UTI had embraced main line tech stocks in a major way during the boom cycle. Correspondingly, the depreciation in its equity portfolio can legitimately be expected to be higher than Rs 20 billion.

Roughly, the net asset value of the US-64 units, which was around Rs 10.81 at the end of December 2000, should have depleted to below Rs 10. The current estimated depreciation of the value of US-64 is based on the assumption that US-64 continued to hold the equity portfolio which they have disclosed at the end of December 2000.

Though UTI has disclosed 75 per cent of the US-64 portfolio for the month of February 2001, the current valuation has been based on the December 2000 portfolio, as the UTI has not disclosed the market value of its investments for February 28, 2001.

In fact, taking the depreciation in the individual top holdings in the US-64 portfolio, the hit on US-64 could be much more. For example, the market value of Himachal Futuristic Communications scrip, which accounted for 3.29 per cent in the fund's portfolio in December 2000, declined 95 per cent between December 30 and April 12, 2001.

The market value of HFCL in US-64 portfolio as on December 30 was Rs 5.69 billion, which should have logically declined to a miserable Rs 280 million.

Similarly the market value of US-64's holdings of Infosys Technologies should have declined 50 per cent from its December 2000 value of Rs 5.32 billion to Rs 2.65 billion on April 12, 2001. The scrip accounted for 3.07 per cent of the total value of the portfolio.

Similarly, the market value of US-64's holdings in Zee Telefilms should have declined by Rs 1.32 billion, SSI and Satyam Computer registered the value depreciation of Rs 1.30 billion each.

Among non-tech stocks, the market value of Reliance Industries, which is the largest item in US-64's portfolio, should have declined by Rs 2.46 billion, and Reliance Petroleum by Rs 1.40 billion.

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