Plan to invest surplus only after PetroMin nod
New Delhi   10-Mar-2008
Fortune 500 firm IndianOil's proposed strategy to invest its surplus funds is restricted to only big equity-linked mutual fund schemes of minimum Rs 500 crore. Investments in equity-linked MFs would be limited to Rs 500 crore in a fiscal and Rs 2,000 crore has been proposed as an overall ceiling for such investments at any point of time. The IndianOil board may, however, enhance the limit subject to investments in equity-oriented schemes not exceeding 30% of surplus funds of longer tenor. The company plans to invest only its long-term (minimum one year) surplus funds in equity-oriented schemes of MFs. The company has, however, not proposed any such restrictions for debt-oriented schemes of MFs. IndianOil's proposed policy on investment of its surplus in MFs would be effective after the approval of the petroleum ministry, an official source said. On August 2007, the government had allowed Navratnas and mini-Ratnas to invest their surplus funds in debt and equity-oriented schemes of SEBI-regulated public sector MFs. Earlier, PSUs could invest their surplus in debt-based units of UTI only. As per the revised guideline, IndianOil can have option to invest in mutual funds of UTI, SBI, LIC, GIC, BOB, Can bank and PNB. "As short-term and time bound investment in equity-oriented schemes may not be prudent, it is proposed that surplus fund available for longer tenor, i.e., preferably for more than two years but at least for a year, may be earmarked for investment in equity-oriented schemes for mutual funds, a company source said. Temporary surplus arising out of regular cash flow movements maybe invested in debt-oriented schemes of mutual funds, in addition to other approved debt instruments, it added. IndianOil is also considering taking services of professional agencies to advice it in choosing right investment instruments. IndianOil has no previous experience in investing in equity-oriented mutual fund schemes. It is proposed that the company should engage an outside agency, other than the target funds, on retainer ship basis for advising IndianOil to invest in or divest from mutual funds, IndianOil has also proposed that equity investments in mutual funds should be made directly by the company without involving any brokers.