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UTI's funds show top-heavy equity portfolio

The Unit Trust of India, the nation's largest mutual fund manager, has disclosed just enough about its holdings to dispel concern it is in dire financial shape.

But by divulging details about just 68 of its 87 funds, it heightened concern the details withheld point to investment decisions which could undermine trust in the state-run fund.

"The 90 per cent of the equity portfolio (of the 68 schemes) clearly indicates that UTI isn't sick," said Dhirendra Kumar, managing director of fund tracking firm Value Research.

"A market turnaround will help it sail through the current crisis."

Last week UTI, the largest investor in Indian financial markets, released details of investments made by a majority of the funds it offers.

But it revealed just three-quarters of the investments made by its largest fund, the flagship Unit Scheme-64 (US-64), in which it suspended redemptions last month. And it revealed no details about its overseas funds.

"The unrevealed 25 per cent (of US-64) could be the unexplained secrets involving embarrassing disclosures," Kumar said.

On July 2, UTI rattled financial markets, frightened investors and provoked an uproar in parliament when it froze repurchases in US-64 due to a surge in redemptions.

Redemptions soared in the April-June quarter on fears of a huge slide in the value of the fund's holdings because of falling markets, and worries the dividend would be slashed.

The ensuing outcry forced the Bombay-based fund manager to backtrack by allowing partial redemptions from August 1.

The former chairman of UTI and two executive directors were arrested in mid-July and face charges of malfeasance, while the government has come under pressure from the opposition and its coalition allies for allowing a second major crisis at the state-run mutual fund in three years.

Created in 1964 by an act of parliament, UTI manages Rs 575 billion for some 41 million investor accounts.

Portfolio holdings

Details released last week show the money managed by UTI is invested in a very concentrated manner.

Holdings in just five companies accounted for nearly half the value of 68 of its 87 schemes.

Ten companies accounted for 60 per cent of the Rs 118.60 billion value of the equity portfolio of those 68 schemes; 20 companies made up 74 per cent of the total.

Investments in 60 companies accounted for 90 per cent of the equity portfolio, while the remaining 10 per cent was spread over 684 firms.

These schemes had combined assets worth about Rs 340 billion, two-thirds of which was in debt.

Major stocks, major sectors

The equity portfolio of the 68 schemes had a distinct bias towards consumer non-durable firms, which account for 28 per cent of their assets.

India's biggest cigarette maker ITC Ltd was the top holding, accounting for almost 11.58 per cent.

Hindustan Lever Ltd -- India's biggest company by market value and the largest foods and personal products firm by sales -- came a close second at 11.52 per cent.

Some 13.4 per cent of the funds was invested in domestic technology stocks. Infosys Technologies, India's second-largest software exporter, was the biggest technology holding at 10.35 per cent.

Petrochemical companies enjoy the third-highest weightage, accounting for 11.3 per cent. Reliance Industries, India's largest petrochemicals firm, alone accounted for 11.09 per cent of total equity assets.

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