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| UTI Chairman M. Damodaran: The fire-fighter |
Delhi
in summer may not be the most ideal holiday destination, but try
telling that to Meleveetil Damodaran, who completes two years as
Chairman of the Unit Trust of India a fortnight from now. In the
last 715 days, Damodaran has transformed an organisation that seemed
to have no hope in hell of survival into not just a performer but
one that's now ready to make the shift into growth mode. So a short
retreat-just four days, and the first one in two years-in the (yawn)
capital will do just fine for the 56-year-old Chairman, who settled
for what he calls a ''busman's holiday, now that the crisis is over''.
Of course, a break in Delhi can't be just that.
Damodaran found time to squeeze in a couple of meetings. More importantly,
the Chairman was also penning a proposal to be made to North Block
(the seat of the finance ministry) on the alternative uses of the
Rs 6,000-crore equity assets of US 64, which ceased to exist in
May. Says Damodaran: ''The common point is that we want to signal
to the market that UTI-I will not be selling the equity. The market
knows the us 64 equity portfolio and though we haven't sold it,
there is an overhang over the market.''
Q&A
"WE ARE RAISING THE BAR" |
| He has lived
up to his reputation as a fire-fighter by pretty much setting
UTI's house in order. During one of his first breaks in the
last two years, ''since there is no crisis now'', as he puts
it, UTI Chairman M. Damodaran, was his usual cool
collected self, as he talked to BT's Roshni
Jayakar about the restructured UTI and the road ahead.
Excerpts from the interview:
Q. You seem to have succeeded in
getting UTI out of the mess. Is your job complete?
A. No job is
ever complete. As you keep doing tasks, you discover more
needs to be done. New tasks emerge out of what you have done.
Even organisations tend to get ambitious over time. First
you want to survive. Then you want to prosper and flourish.
I think we have sorted the problem of survival. But being
a leader, it's not good enough to just do reasonably well.
We are setting the bar higher. We need to address a large
number of issues including the growing of assets under management.
UTI MF's assets will double in a year.
Now when you look back, what was
your major challenge?
It was containing the problem schemes in one unit
so as to allow other unit to grow. The purpose of carving
out UTI MF from UTI was to ensure that these schemes were
not adversely affected by negative association. Some of the
investors are still not clear about the division... there
are those who still think we are an undivided UTI. The process
of communication will take a while.
What happens to the equity portfolio
of US 64, now that the units have been converted into bonds?
With more than 80 per cent of the investors opting
for bonds, we did not liquidate the equity portfolio of US
64. The normal thing would be to sell the Rs 6,000-crore equity
portfolio over time and return the money to the government,
since the government has issued 6.75 per cent bonds. We are
working on several models and making a presentation to the
ministry soon.
One option is UTI-I will manage the assets so as to service
the 6.75 per cent bonds. The second could be to convert the
equity into a corpus of a new fund and manage it for the government.
We are devising schemes whereby once the policy decision is
taken, we will signal the market that we are not going to
sell the equity.
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Only last fortnight, Damodaran's turnaround
touch was once again in ample evidence when UTI MF-a SEBI-compliant
asset management company with a Rs 15,243 crore corpus, 42 schemes
and four offshore funds-mopped up Rs 1,000 crore with its first
scheme, a liquid fund. In just two days. That's not the only initiative
flagged off from the Trust's new headquarters, UTI Towers, a seven-storied
edifice in the Bandra-Kurla complex, Mumbai's new business district.
In February, the restructuring of UTI was almost complete with the
Trust being bifurcated into two separate entities, UTI-I and UTI
Mutual Fund. UTI-I, as a special unit with all the guaranteed return
schemes, has an outstanding corpus of Rs 19,200 crore and 18 schemes.
The problem scheme-US 64-was laid to rest on May 31, with the units
converted into 6.75 per cent tax-free bonds.
Mending the tattered reputation of the Trust
would have been tough for any one, including a seasoned fire-fighter
like Damodaran (See The Goal-Keeper At UTI). Two years ago, not
only was UTI's portfolio of investments far from healthy, the stockmarkets
were headed south, the CBI was investigating some of the Trust's
investment decisions and the US-64 scheme's woes were at its peak.
So what did Damodaran do? ''In a difficult situation, the chairman's
job is to create an environment where others can perform. It is
not to do others' job." Damodaran's task was to generate positive
results with the existing talent. And he did succeed.
Growing Of Assets
Till three years ago UTI never felt the need
to market itself. Every year the monopolistic Trust would launch
a few monthly income plans, besides the ritualistic us 64 unit sales
during July. Now the Trust has to market itself. The plan for UTI
MF is to double the assets under management in a year's time to
Rs 30,000 crore.
The gameplan is simple, at least on paper:
Launch enough products to cater to the various groups. After the
roaring success of the liquid plan, on the cards next is Sunder,
an exchange-traded fund, based on the National Stock Exchange's
Nifty index of 50 shares. Says Dhirendra Kumar, CEO, Value Research:
''Whilst earlier UTI's somnolent marketing department was just doing
the easiest job-promising returns and raking in cash, which finally
was instrumental for the deep hole (the Trust found itself in) a
few years later-now it has to produce what the market wants.'' Along
with new products, UTI MF is also rejuvenating its marketing and
distribution set-up.
It was the presence of several poor and questionable
stocks in the portfolio of us 64 and in those of other schemes that
eroded the value of the funds' investments. Today, the philosophy
is to have as many as stocks as can be monitored daily.
Another fundamental change is that the Chairman
no longer green-signals investment decisions. The fund managers
are now squarely responsible for their finds.
Last August UTI MF put in place a Front Office
System. The front office system handles the flow of structured information
and runs on the PCs of all those individuals who are part of the
fund management structure.
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THE GOAL KEEPER AT UTI
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Late
in the evening of Saturday, July 14, 2001, as Meleveetil Damodaran
was trying to get into his car, juggling his mobile and an
umbrella in pouring rain, he received a call that would make
him the Chairman of India's largest-and most troubled-mutual
fund. The 1971 batch IAS officer is the first bureaucrat to
head UTI. His CV has what it takes to tide over crises. His
last assignment before UTI was with the Reserve Bank as an
officer on special duty for restructuring three banks, namely
UCO Bank, UBI, and Indian Bank; and a little over a decade
ago, when insurgency was a way of life in the north-eastern
state of Tripura, it was Damodaran, then Chief Secretary of
the state, who saw things through. Bringing UTI out of the
mess called for all his political, managerial, and financial
skills. Initially, a lot of time was involved in putting out
the fire, meeting with people in small groups, continuously
liaisioning with the government, especially to get funds to
meet redemptions. Now that the fund is structurally SEBI compliant,
there are new responsibilities and more of Damodaran's time
is spent on working out new marketing strategies or hearing
out presentations by fund managers.
Says Damodaran: ''I have had interesting jobs...since the
beginning of my career; I have been lucky. Initially, I did
some things by instinct, some by reason.'' Damodaran is a
sports lover too. He often draws analogies with games like
cricket. What's more, he is writing a book on the football's
greatest goalkeepers. Ask him if a fire-fighter's job is rewarding,
he replies rather predictably: ''I don't think one should
do any work expecting rewards.'' Hopefully, the powers-that-be
won't take that too seriously when considering his next posting.
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The system automates the core functions and
ensures compliance with regulatory requirements. When an UTI fund
manager wants to buy or sell, he logs on and places the order. The
system checks the transaction for any violation before putting it
through. Moreover, integrated into the system is the broker selection
mechanism. The system operates by ranking each broker on a quality
scale and on how much business UTI has given him or her.
Future Of UTI-I
This unit has Rs 19,200 crore assets under
management, including equity of Rs 2,800 crore, the rest being debt.
Now that us 64 ceases to exit, one option is to convert the equity
into a corpus of a new fund and manage the assets for the government,
as in the case of Special Unit Scheme 99 (SUS 99). In fact, SUS
99 has been appreciating in value with its NAV more than doubling
from Rs 45.96 per unit of Rs 100 in June 1999 to Rs 112.70 as on
June 20, 2003. Four long-term assured return schemes will close
by end of this year, as they do not make commercial sense, while
the five-year monthly income plans that go beyond March 2004 are
candidates for premature closure. Once that is done the only scheme
left with UTI-I is SUS 99, where the government is the only investor.
Clearly, UTI is in a much better shape than
it was three years ago. The task for the finance ministry is to
find somebody able enough to fill Damodaran's shoes particularly
in the light of the fm's statement in Parliament that UTI won't
be privatised at least for the next five years. UTI itself has got
in Hewitt Associates to identify a group of general managers who
will be put on the fast track system. Says Damodaran: ''Our expectation
is one of the three-to-four who will come through the grind will
be tomorrow's CEO.'' Damodaran will move on, but for the reborn
UTI the long haul has only just begun.
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