VR Logo

Blast from the Past

US- 64 investors are ruing their decision now as the investment is not as rewarding as it seemed

Hari Mohan, a 45 year old clerk at the MTNL's New Delhi establishment, could not conceal his dismay. “At a time when inflation is at 7.5 per cent, the 6.75 per cent that they are referring to is peanuts,” he says with reference to an article in the newspaper about the bonds issued to investors in lieu of UTI's US-64 schemes unit. Incidentally, the Unit 64 scheme is maturing on May 31, 2008.

Hari Mohan is not alone, 83 per cent of 20 million unit holders of the then US-64 schemes stood party to this mass exodus. In April 2003 when the sordid US-64 saga was laid to rest by the then NDA government, it was decided that investors of US-64 be given the option of 6.75 per cent tax-free bonds or liquidation of their holding. Investors holding up to 5,000 units would be offered Rs 12 and for additional holdings they would be offered Rs 10 per unit. “You get paid at the face value for a scheme you held for almost 40 years. So the plan B with tax-free advantage looked lucrative. It was an enforced error,” says Mohan.

Rightly said, the tax-free option did look rewarding, then. But it turned out to be one of the most horrendous investment decisions one could have ever made. Consider this - Rs 1 lakh invested (shifted) to the bonds would fetch Rs 1.38 lakh in a span of year (May 31, 2008). Had this amount been invested in other existing schemes of UTI, say UTI Balanced, the amount would have swollen to Rs. 3.43 lakh. Even if you consider the conservative UTI Mahila Unit Scheme, which invests 66 per cent in debt, you would have been sitting on a pile of Rs 2.50 lakh. A little bit of conscious and judiciously decision and the corpus would been a pharaohcious Rs. 11.86 lakh, if invested in Reliance Growth.