The UTI problem has now taken a curious turn with the accused pointing fingers at the Finance Minister for influencing the investment decisions of the fund. Since  Mr Sinha was actively involved when the last US-64 controversy surfaced immediately after Mr Subramanyam took over as the Chairman of UTI , it is likely that the media and the political circles will take this development further and create further uncertainty in the market if the fallout is not properly addressed.

During the last US-64 problem days, media went to town to highlight that when other funds were making huge profits with 50%+ exposure to IT stocks, UTI had no exposure at all to the sector. Today the same media is coming to the conclusion that the current debacle was only due to the investments in IT stocks. In the process they are creating a “Tainted Share Syndrome” around the scrips in the US-64 portfolio. As a result, these scrips tend to depreciate more than the market until the sentiments play out.

While making a post mortem analysis of the Fund’s performance in the media circles, we must remember unless one is able to re-live the same market sentiments, it is not possible to say that buying Cyber Space at Rs 930 was malafied per-se. The market should also remember it has now been found that  several other  funds had also bought the same scrip around  that time around the same price. It is quite possible therefore that the loss to the US-64 may not be as much as a result of a “Wrong Buy” as an inability to take a “Sell” decision in time. 

The  new UTI management should not forget that the key to effective fund management is to know “when to sell” as much as to know “when to buy”. Otherwise, there is a danger that UTI may create systems that make “Buying” pass through several decision layers, delaying the decision while leaving the “Selling” process un attended.  Such inefficiencies  built into the system of fund management in UTI  can only lead to more problems in the days to come.

Under these circumstances it would be worthwhile to re visit one of the scrips which fall into this category of “Tainted Shares” by virtue of being a K-10 scrip. This is Aftek Infosys, a look alike to Cyber Infosys.
 

Aftek Infosys Ltd’s (AIL) originally started with the distribution and servicing of computers and microprocessor based peripherals. It has now  shifted focus to software development. 

One of the main products of the Company is the UPS management system called “Powersafe” particularly important for all enterprise network management systems. As a certified development partner of Computer Associates (CA), Power safe is sold along with CA ‘s  own leading network products. The company also maintains all installations in USA and India of Computer Associates. Infosys and Wipro are also being serviced by Aftek. 

Other products which the  Company has developed include Smart Hire a pre-recruitment software , a range of products for Palm products and embedded software. It has also developed a number of software-based special products like Personal Data Assistant (PDA), pre-paid smart cards, barcode readers etc. It has also developed India´s first automatic fare collection systems on BEST buses in Mumbai which is expected to go on commercial exploitation soon.

Interim report of SEBI on Ketan Parikh’s controversy  had reported in May 2001 that “Manipulation” of share prices were evident in several scrips including Aftek Infosys. But the results now announced for the fourth quarter ending June 2001 and the year 200-2001 indicates that the Company has actually achieved an impressive results for the year. Its quarterly net profit jumped to Rs 8.65 crores from Rs 2.41 crores during the last year.  The net profit for the whole year nearly trebled from Rs 8.46 crores to Rs 24.69 crores. The accompanying table showing the growth of the company over the last three years indicates that the current performance is not a flash in the pan but is a culmination of a steady growth.

 

The “Tainted Share Syndrome” created by the media has however been successfully exploited by the bears to hammer the price of this scrip down to around Rs 108 at present as against the 52 week high of Rs 1559. The P/E ratio is now less than 3. If the performance is any indication, the “Taint” is likely to vanish soon.

The share is therefore presently good for accumulation by long term investors having faith in the inevitable prosperity of the IT sector.

Naavi
July 28, 2001