Days after the Supreme Court directed transfer of all petitions related to Franklin Templeton’s decision of shutting six debt mutual fund schemes to the Karnataka High Court, Sanjay Sapre, President of the fund house’s India unit told investors that the wound-up schemes received Rs 1,964.21 crore from maturities, pre-payments, and coupon payments since closing down in April. Sanjay Sapre in a letter addressed to investors of the schemes that were shut, said that everything is being done to return money to investors at the earliest, news agency PTI reported. Franklin Templeton shut six debt mutual fund schemes on April 23.
Investors were updated on the status quo in terms of the legal matters that the fund house is dealing with. Sanjay Sapre said that the apex court, last week, considered the special leave petition and transferred all pending legal cases to a division bench of the Karnataka High Court. The Supreme Court has also directed that the matter be completed within three months. “I can understand that the delay due to various legal cases has added to your disappointment and inconvenience. We are doing our best to have these resolved at the earliest so that the schemes can start to efficiently monetise assets and return money to your money,” Sapre said.
The six schemes that were shut down by Franklin Templeton included; Franklin India Low Duration Fund, Dynamic Accrual Fund, Credit Risk Fund, Short Term Income Plan, Ultra Short Bond Fund and Income Opportunities Fund. Two of the six schemes (Franklin India Ultra Short Bond Fund & Franklin India Dynamic Accrual Fund) have repaid their bank borrowings and are cash positive. Sapre told investors that two of the six schemes have surplus cash and the fund house will take appropriate steps to distribute the money to the unitholders at the earliest.
Franklin Templeton has been asked to not hold e-voting for the six schemes by the Gujarat High Court, which sought to study the audit report of the wound-up schemes. The fund house, however, is looking to request the Karnataka High Court bench to vacate the order. Sanjay Sapre said that Franklin Templeton has been working on development of a monetisation strategy for each of the securities in the portfolio. Investors were also informed that the wound-up schemes continue to receive maturities, prepayments, and coupon payments.
Monetisation of the assets under any of the schemes will not be possible for Franklin Templeton until they get consent from unitholders, which can only be possible if the Gujarat High court’s order is vacated. The fund house has maintained that the issue has always been that of liquidity and not of solvency. “We anticipate that Franklin India Ultra Short Bond Fund will have in excess of 7% of its AUM available to distribute to unitholders by the end of June 2020, and Franklin India Dynamic Accrual Fund could have in excess of 6% of AUM by this same time,” Sanjay Sapre told investors.