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UTI ELSS faces redemption

UTI's money guzzlers of yesteryears are fast losing their sheen among investors. Equity-linked tax s

UTI's money guzzlers of yesteryears are fast losing their sheen among investors. Equity-linked tax savings schemes or ELSS, have seen a massive erosion in their capital base in the last one year. With poor returns and closed-end tenure of 10 years, investors have opted for repurchase after the mandatory lock-in of three years.

In the last one year, there has been an average fall of 25 per cent in the unit capital of 7 tax-planning funds, open for repurchase. On the other hand, the assets under management have fallen by over 20 per cent to Rs 2443 crore. The worst hit is UTI's MEP '96, whose base has shrunk by a whopping 39 per cent to Rs 96 crore. Since launch in March 1996, the fund has given a paltry return of 7.74 per cent on September 30, 2000. Another large sized ELSS, MEP '95, has seen its capital erode from Rs 735 crore to Rs 468 crore. The fund's assets under management have also gone down from Rs 831 crore to Rs 612 crore, despite a rise in NAV from Rs 11.31 on June 30, 1999 to Rs 13.09 on June 30, 2000.

That investors are pulling out of ELS funds is attributed to the poor returns from these tax-saving vehicles. Even though ELS schemes offer tax-breaks under section 88 and have a lock-in of three years, they are essentially diversified equity funds. However, the returns from UTI's MEP series have not been inspiring enough to hold investors beyond the lock-in of three years. For instance, the eight MEPs (till 1998) have given an average return of 6.6 per cent with MEP '95 doling out a miserable return since launch of 2.31 per cent. The only exception has been UTI MEP '99, which has generated a whopping return of 80 per cent as on September 30.

On the other hand, the open-end ELS funds from other AMCs have been generating impressive returns, apart from providing tax-breaks to investors. For instance, Alliance Capital Tax Relief (ACTR '96) has given a one-year return of 65.14 per cent while Birla Equity Plan has posted a gain of 53.87 per cent. Thus, even as the lock-in is over for investors in ACTR '96 who entered in 1996, they have a reason to stay put since the fund has generated worthy returns.

    2000  1999  Since launch  Sensex
  UTI MEP '91 68.51 89.64 11.75 14.09
  UTI MEP '92 367.60 494.80 5.52 -0.54
  UTI MEP '93 162.42 173.91 10.66 8.09
  UTI MEP '94 294.17 453.86 1.63 1.22
  UTI MEP '95 467.69 734.75 2.31 4.20
  UTI MEP '96 95.91 157.40 7.74 4.42
  UTI MEP '97 63.87 73.29 3.97 5.77
  UTI MEP '98 21.66 21.66 9.22 2.00
  UTI MEP '99 3.49 3.47 79.68 6.14