Wait is Over! Franklin Templeton India Mutual Fund to Repay Investors of 2 Debt Funds

Franklin Templeton Mutual Fund (FT) announced the wind-up of six debt schemes in April 2020, citing poor liquidity condition in debt markets due to COVID-19 crisis. The fund house received consent from its investors, more than 90% unitholders in each of the six schemes voted in favour of winding up.

Following the decision to close the schemes, the fund house endeavours to make regular payments to investors. SBI Funds Management was chosen by the court to handle the asset liquidation and distribution. Investors in five out of six schemes that have turned cash positive have received a portion of their money. These include - Franklin India Ultra Short Bond Fund, Franklin India Low Duration Fund, Franklin India Short Term Income Fund, Franklin India Credit Risk Fund and Franklin India Dynamic Accrual Fund.

While ensuring that unitholders gain the most value from the underlying securities, a significant portion of the funds from these schemes have been released in subsequent tranches over the course of last few years. However, Franklin India Income Opportunities Fund's (sixth scheme) distribution of money may only start when its borrowings have been repaid.

Recently, on June 12, 2023 Franklin Templeton India mutual fund announced that it will repay an amount of Rs 178.06 crore to investors of two of its wound-up debt schemes, starting June 14, 2023. Unitholders of Franklin India Credit Risk Fund and Franklin India Short Term Income Plan will be receiving refunds from the fund house this week.

The Asset Management Company declared that it will pay off Rs 39.27 crore to investors of Franklin India Short Term Income Plan (FISTIP) and 138.79 crore to investors of Franklin India Credit Risk Fund (FICRF). The fund house stated that SBI Mutual Fund would electronically pay all eligible unitholders. A check or demand draft shall be sent to the registered address of any unitholder who are not eligible for electronic payment.

Franklin Templeton India mutual fund has paid a total of Rs 27,109 crore across five of the six debt schemes following this latest instalment. The entire amount that has been released thus far is between 100% and 113.04 % of the assets that each of the six schemes has under management. While some of Franklin Templeton's exposures have defaulted on their debt obligations, others have continued to make payments and some of its exposures have even sold securities at a profit. This might be what caused the cash distribution to exceed 100%.

Additionally, the recent repayment also means that the fund house would have extinguished units from five of the six schemes that were closed in 2020, which would have had an impact on almost 300,000 investors. Given that until now the fund house has paid off all its unit holders of almost all the schemes, it will still continue to pay off securities currently valued at zero or that have matured but defaulted as and when such amounts are recovered or received.