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Mastershare: Now the Discount Means Buy

UTI planning offer to repurchase Mastershare will present an opportunity to make a cool 20 percent, given the present discount

Mastershare, UTI's first equity fund is about to be delisted from the Bombay Stock Exchange. To provide liquidity, UTI will offer repurchase at NAV related price directly to its investors. So if you own Mastershare, soon you can go to UTI to redeem the units rather than calling your stockbroker.

But for sometime, this provides a compelling arbitrage opportunity. If you buy Mastershare units from the market at its current price of Rs 9.20 (as on Nov 29 '01 at BSE), you can make a cool 20 percent, as its NAV is Rs 11.06. Of course, you will have to face the drudgery of buying, getting it transferred in your name and then lodge it with UTI for redemption. Moreover, this is not risk-free as you will have to hope that NAV remains at its present levels to negotiate this return. And I missed on the transaction cost, i.e. brokerage payable when you buy this from your stockbroker.

Ofcourse, this is only an attractive short-term deal, not a long-term buy. Mastershare offers nothing special to justify a long-term buy as UTI remains clouded by the uncertainty of Unit Scheme '64. It hurts Mastershare indirectly, as it is unlikely to get focussed management attention with prevailing problems.

But doing all this can yield sweet reward as the fund looks in good heath, well spread across large cap FMCG, diversified and technology stocks. The market is also looking up after a long time providing an opportunity for you to make your buck.