U T I, U T I AND U T I, the three-letter abbreviation has become a hot word in India during the last few months and will be so for quite some more time. The MUCK in the Cyberspace-UTI share-purchase scam is flying thick and fast with big GUNS getting dragged in by the day, IN HIS STATEMENT to the CBI on July 26, 2001 jailed ex-UTI chief P S Subramanyam has claimed that among those who called him up regarding the purchase of Cyberspace shares are Finance Minister Yashwant Sinha’s private secretary Bharat Vyas, stock market regulator SEBI chief D R Mehta, and BJP MP from Rajasthan Ramdas Agarwal and ironically, Ramdas is a member of the Joint Parliamentary Committee inquiring into the scam.

This is something which can be spelt out in a three letter word WOW….the drama is sure a buster and a big shaker.

The man ex-boss of U T I P S Subramanyam has also claimed that he got a call from the Prime Minister’s Office ‘‘purportedly conveying a message’’ from Principal Secretary Brajesh Mishra, The caller had referred to himself as some Shri Kumar and the voice was not familiar to me and I was not sure whether it was a genuine call.

AND THE PMO was dragged into the mess in Parliament today when Shiv Sena MP Sanjay Nirupam mentioned the names of former PMO Secretary N K Singh and the Prime Minister’s foster son-in-law Ranjan Bhattacharyya. P S S also said that ‘I had earlier received oral general inquiries about the proposal (of UTI purchasing Cyberspace’s shares) from Chairman SEBI, Honourable Member of Parliament Ramdas Agarwal, and Private Secretary to Finance Minister, Shri Bharat Vyas.

AND when asked >Did they ask him to fork out Rs 32 crore to buy Cyberspace’s shares at a whopping Rs 930 per share?, P S S says that in the financial sector it is not unusual to hear such oral enquiries and some see it as a sort of indirect pressure and also revealed that he ‘‘mulled over the matter’’ and mentioned these ‘‘oral calls’’ to ‘‘Executive Director Shri S K Basu over the lunch table’’ and ‘Executive Director Shri M M Kapur also remembers that I had spoken to him as he generally does not join us for lunch.

When contacted both Sinha’s private secretary Vyas and SEBI chief Mehta categorically denied the charges and Agarwal could not be contacted as he was out of town. Vyas in turn said that ‘I’ve never spoken to him about Cyberspace and Mehta was more emphatic > ‘It’s absolutely false and malicious. Not only have I not spoken to him about Cyberspace, what influence do I have over Subramanyam? I can’t even inspect US-64.

Subramanyam further says he got to know Rakesh Mehta of Rennaissance Securities (one of the persons accused in getting UTI to buy Cyberspace shares) while at Jodhpur (where D.R. Mehta hails from) when Mehta was inaugurating a UTI branch, Mehta says this is all fabrication and ‘Subramanyam forced me to inaugurate the branch and now he’s trying to insinuate Rakesh Mehta was there at my behest.

Mehta says that he was out of the country till July 19 last year-UTI’s research cell had recommended against Cyberspace on July 17 and Subramanyam overruled them on July 21 and once word got around in Mumbai of Subramanyam’s name-dropping, he checked with his secretary and there was no call from him to Subramanyam during this period.

Subramanyam’s note spends the rest of the time defending himself and it says that >In spite of it, the alleged phone calls he received, I had not intervened’ in asking either the ‘‘Department of Investment or the Equity Research Cell to generate a favorable note, and as a professional left it to the professionals.

The former chief, while claiming that the decision to buy Cyberspace shares was a ‘‘bonafide commercial decision and was not based on extraneous considerations,’’ told the CBI that it is clear that Cyberspace had ‘‘passed through several channels before it obtained assistance from UTI such as Registrar of Companies, merchant bankers, foreign consultants, stock exchanges, SEBI and so on.’’

And that it had ‘‘passed the usual tests or milestones before it offered the shares on private placement...As investors, whether institutional, including UTI, or individual, they come last in the picture.

Spotlight centers around P S S’s phone talk.

Hey man the U T I DRAMA is sure getting thriller and enjoyable as the record of calls made and received by P S Subramanyam on his mobile phone reveals that the former UTI chief was in touch with the then secretary in the PMO, N K Singh, a day before the US-64 subscribed to the private placement of the controversial Cyberspace and the statement of calls shows that Subramanyam and Singh were in touch on July 20.

Interestingly, this was a day before UTI overturned the recommendations of its equity research cell against investment in Cyberspace. Subramanyam and Singh talked thrice on that day. The mutual fund purchased 3.45 lakh shares at Rs 930 per share the following day.

The talks between Subramanyam and Singh could be coincidental with UTI’s subscription to the Cyberspace private placement, but the coincidence has aroused interest in political circles here with an NDA ally - the Shiv Sena - raising the issue in Rajya Sabha here on 30/7/2001 Monday. When contacted, N K Singh said: "Since the matter is under investigation with the CBI, it is not appropriate for me to give a detailed comment."

UTI in block deals with FIs to avert liquidity woes

In a move to create liquidity for meeting possible redemption pressure in its Unit Scheme-1964 (US-64) from August 1, the Unit Trust of India (UTI) is understood to have entered into block deals with financial institutions, including Life Insurance Corporation of India (LIC). Former UTI chairman PS Subramanyam had suspended both sale and repurchase of US-64 units on July 2.

These block deals are usually done through a tacit understanding with the buying entities and do not impact the prices in the open market, said a broker with a leading institutional investor and Interestingly, among FIs, LIC is said to be on the top of UTI’s list to meet liquidity due to redemption from small investors of US-64. LIC officials refused to comment on the matter. However, they said no such block deals have taken place.

While these block deals have been in the market for over a week now, the pace and size of such deals are said to have gathered momentum from Monday, brokers said, the UTI’s new chairman M Damodaran had said that UTI has already arranged line of credit with banks (both state-owned and private sector) as also with the financial institutions.

However, while the line of credit could be utilized against pledging of government securities and triple ‘A’ rated corporate paper, UTI has to sell its equity holding in various companies to raise money. And at this stage, the FIs are the only best bet. While UTI sources refused to either confirm or deny the commencement of raising necessary funds through block deals with the FIs, a top UTI source said: "Market operation is an ongoing affair." He refused to divulge any further information.

Amidst this, market men cite names of various companies whose shares are being sold through block deals. Among others, these are Reliance Industries, Infosys, Dr Reddy’s, Tisco, Asian Paints, EIH and Indian Hotels Said another broker: "Open market sales may further dampen market prices and, as a result, UTI is going for negotiated deals so as to keep the market price unaffected."

Under the US-64 scheme, there are around 1.85 crore unit holding accounts with up to 3,000 un its totaling to around Rs 5,926.13 crore (at face value) as on June 30. Thus, the redemption pressure is expected to be of around Rs 6,000 crore, if all these unit holders go to UTI for redemption from Aug 1.