MFs Do Not See Investments From PSUs

Bangalore: Mutual funds do not see navratna and mini-ratna public sector companies infusing in equity schemes immediately in a big way despite the government allowing them to infuse up to 30 per cent of their cash surplus in the equity schemes. The cabinet committee on economic affairs on July 30, said the public sector undertaking (PSU) companies can now infuse in equity schemes of the state-owned mutual funds. UTI Mutual, SBI Mutual, and BoB Mutual qualify as the state-owned mutual funds. Fund officials said normally PSU companies, being conservative in nature, would opt for short-term debt schemes such as liquid funds for their surplus cash management.
There will be more of inflows in short-term liquid funds, said State Bank of India-sponsored SBI Mutual. UTI Mutual said they will go for treasury management tools such as in liquid, fixed term plans. Liquid or cash plans are used mostly by corporate treasuries for short-term cash management as they on an average earn 7-7.5 per cent return. Companies find them attractive over zero-interest earning current accounts, also, because liquid plans do not levy an entry or exit fee. The surplus cash of PSUs is pegged at Rs 100,000-120,000 crore. PSUs were so far allowed to invest only in fixed deposits of state-owned banks and government securities. In January 2005, the finance ministry had permitted non-government provident funds and gratuity funds to deploy up to 10 per cent of the corpus in equity funds, while exposure in gilt funds was restricted to 5 per cent.