The Unit Trust of India (UTI) is likely to skip dividends for its flagship scheme, Unit Scheme-64 (US-64), this year. A final decision on this front will be taken after the trust closes its accounts on June 30. UTI operates a July-June financial year.
In case UTI decides to skip the dividends, it would be a first-time for US-64 in recent years. UTI had declared a dividend of 10 per cent in June 2001, 13.75 per cent in June 2000 and 13.50 per cent in June 1999. In June 1998, it declared a dividend of 20 per cent.
The general feeling among senior UTI officials was that any dividend announced would be now taxed in the hands of investors and would hurt them in any case, especially since the expected quantum of dividend could only be nominal at the best of times.
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Moreover, since any dividend declared would have to come from the sale of assets and not from disposable profits, such a pay-out would affect the net asset value (NAV) of the scheme. Hence, it would be prudent to give investors higher returns through growth and consolidation in the NAV rather than through a cash pay-out. Officials confirmed that restructuring of the scheme was on schedule, and most of the negative factors in the scheme had been removed. Also, the performance of the scheme is expected to improve with the improvement in general stock market sentiments.
Meanwhile, as a part of its restructuring exercise, UTI has realised Rs 2,300 crore from the sale of equity investments during July 2001-May 2002. Further, it has switched to corporate debt papers ranked AA+ and above. The trust has already provided for most of the non-performing assets.
As on April 30, 2002, the assets under management stood at Rs 12,717.24 crore.
However, the gap between sales and repurchases in US-64 continued through May. Repurchases of units have touched Rs 892.71 crore, ever since the special window was started in August 2001 for small investors. Repurchases linked to the NAV stood at Rs 70.94 crore from January 1, 2002. Sales based on the NAV stood at Rs 84.47 crore.