Market downturn dries up ELSS dividend payouts

List of divided declared on ELS schemes in 2008-09:

MUMBAI: The stock market carnage has not spared equity linked saving schemes (ELSS), with the dividend declared by fund houses seeing a sharp fall in FY 2008-09 from the previous fiscal. The average dividend declared in FY 2008-09 was 28 per cent as against 44 per cent declared in FY 2007-08.

Twenty three schemes had declared dividend in the previous fiscal ranging between 15 per cent and 200 per cent, while this fiscal this number has come down to 9 schemes declaring dividend from 10 per cent to 50 per cent. Only five fund houses announced divided in 9 ELSS schemes. These include Birla Sun Life MF, HDFC Mutual, ICICI Prudential AMC, Franklin India AMC and Taurus. This is in sharp contract to the earlier year when 17 fund houses declared dividend in 23 ELSS schemes.

In FY 2008-09, Taurus Libra Tax Shield ruled the roost, giving dividend three times at 10 per cent each in December, January and March. HDFC Tax Saver and Birla Sun Life Tax Relief 96 gave highest dividend of 50 per cent in March and June respectively during the current fiscal.

In FY 2007-08, Birla Sun Life Tax Relief 96 declared the highest dividend of 200 per cent while HDFC Tax Saver disbursed 80 per cent dividend. The ex-dividend NAVs for these two schemes stood at Rs 86.74 and Rs 58.092 on March 25, 2008 and March 8, 2008 respectively. The same eroded to Rs 66.86 and Rs 26.155 on June 27, 2008 and March 6, 2009.

Most of the ELSS schemes have not booked any profit and hence they don���t have any surplus income. In such conditions, declaring dividend is nothing but a gimmick to lure investors, fund distributors said.

���Bruised by the tumbling market, investors have already seen huge erosion in their NAVs. Declaring dividend will bring down the NAV further,��� said Hiren Dhakan, mutual fund analyst, Bonanza Portfolio.

Vinay Shukla, senior vice president, India Infoline, said, ���MFs are guided by the psychology of investors who feel ELSS schemes declaring dividend are only worth investing and performing.���

���Declaring dividend also involves overhead costs, which will directly impact the NAV of a scheme later,��� added Shukla.