Franklin MF to extinguish units in 5 out of 6 schemes

Franklin Templeton India Mutual Fund on Monday announced that it will repay Rs 178.06 crore to investors of two of its wound-up debt schemes from June 14.

After this latest instalment, a cumulative amount of Rs 27,109 crore would have been paid across five of the six debt schemes, excluding FISTIP. The total disbursed amount so far ranges between 100% and 113.04% of the respective assets under management of the six schemes.

Additionally, the latest payment signifies that the fund house would have extinguished units from five out of the six schemes that were wound up in 2020, affecting over 300,000 investors.

The fund house encountered difficulties when its credit decisions on exposure to various companies went wrong, and its illiquid portfolio couldn’t handle the redemption pressure, forcing it to borrow. Eventually, they had to take the drastic step of winding down their funds.

While some of the debt papers in the schemes did default on payments, the fund house was able to generate profits from its other investments.

Out of the total amount of Rs 178.06 crore to be distributed, Rs 39.27 crore will be paid to investors of Franklin India Short Term Income Plan (FISTIP) and Rs 138.79 crore will be paid to investors of Franklin India Credit Risk Fund (FICRF). Funds will be electronically disbursed by SBI Mutual Fund.

Unitholders who are not eligible for electronic payment will receive a cheque or demand draft at their registered address.

In 2020, the company wound up six of its debt-oriented schemes, citing continued redemption pressure and a lack of liquidity in debt markets amid the pandemic.

The six debt schemes were: Franklin India Ultra Short Bond Fund, Franklin India Low Duration Fund, Franklin India Short Term Income Plan, Franklin India Income Opportunities Fund, Franklin India Credit Risk Fund, and Franklin India Dynamic Accrual Fund.

In addition to payments made to date, any recoveries or receipts from securities currently valued at zero or that have matured but defaulted on their repayment obligation will be paid out to investors as and when such amounts are recovered or received.