Officials of UTI Mutual Fund (UTI MF) said on Tuesday the firm will soon introduce products specifically for public sector undertakings (PSUs), which have been allowed by the government to invest a part of their cash surplus in mutual funds (MFs).
“Under the current rules, there should be at least 20 investors in an MF, and no single investor can have more than a 25% stake,” UTI MF chairman and managing director U.K. Sinha said. “So, we will come up with new products to meet their requirements.”
In August, the Union government allowed the navratna and mini-navratna firms to invest up to 30% of their cash surplus in public sector MFs.
These cash surplus funds are estimated to be around Rs3 trillion. Ahead of the announcement, speaking at a workshop on investment of surplus funds by PSUs in MFs, Sinha said equity investments have given an average return of more than 20% since the inception of the Bombay Stock Exchange in 1979.
Speaking on the occasion, Oil and Natural Gas Corp. Ltd (ONGC) chairman and managing director R.S. Sharma said the company has about Rs19,000 crore in surplus funds.ONGC’s board will soon take a decision on investment in MFs.
Indian Oil Corp. Ltd chairman S. Behuria also pointed out that in comparison with returns on government debt that do not cross 7% on an annualized basis, the last three years’ average return on diversified funds of UTI and State Bank of India (SBI) has been more than 40%.
UTI MF is also hoping to raise Rs4,000 crore through its latest infrastructure fund, of which Rs400 crore is expected to come from overseasinvestors, especially fromWest Asia.
This is the largest new fund offer by UTI MF before the company floats its proposed initial public offering (IPO), which is expected to hit the market by February next year.
Sinha declined to disclose the size of the IPO. That would be dependent on the share price, which would be decided by the market, he added. In October, the MF’s assets under management stood at Rs51,753 crore—up 15% from September.