42 per cent of UTI to be privatised.

(From Indian Express)

Apart from announcing a Rs 14,561 crore bailout package for the beleaguered UTI, and ending the anxiety of its 15 million or so investors, the government plans to split UTI into two parts, one of which is to be privatised. UTI-2, the part which is to be privatised, comprises all of UTI's schemes which for which there are no guarantees, on either the return or on the principal being protected-currently, these schemes manage a portfolio of Rs 17,784 crore, or an amount that's a little over 42 per cent of UTI's total portfolio size of Rs 42,000 crore. No time frame has been announced as yet for the privatisation. Bailout made easy

As an investor in existing UTI schemes, does it really matter to me if my money is now with UTI-I? Should I now say 'enough is enough' and mop my funds and bid good bye to UTI? No. Stay put and consider the most profitable way out now from these funds. Broadly, UTI-1 is in two parts has US-64 and MIPs. For US-64: With government's bailout, of a guaranteed repurchase price, the action plan for an investor is rather straightforward. For unit holdings up to 5,000 units, it makes sense to stay put in the fund for sometime, as your downside is protected with assured repurchase price. You can sell only 5,000 units back to UTI at Rs 11.20 in September 2002. This price is revised by 10 paisa every month till May 2003, when its final repurchase price will be Rs 12. For holdings above 5,000 units, you can still take a chance. For these units will be redeemed at an assured price of Rs 10 in May 2003. But keep a close eye at the NAV. Until that time if the NAV crosses Rs 10-then it would make sense to take a call on the opportunity. For MIPs,in most cases you will be better off by staying with the fund till redemption. What's in it for me in UTI-II? As a government scheme, which will eventually be privatised, what is it value proposition vis-a-vis other private funds? UTI-II consists of new generation open-end or closed funds without any baggage. There is a hope as its a banquet of good and bad performers like any other AMC. And the UTI management can focus on fund management than managing crisis. As an investor what are the strengths, weaknesses, opportunities and threats I should know of in between the lines? UTI-1 is government. So live with it till you have to. UTI-2 looks a reasonable fund family with all key products, a superior economy of scale, now with the management focus as well, the widest reach through the country and massive investor servicing infrasructure. Soon, UTI-2 funds can well qualify as a reasonable vehicle if they state a clearly ...