The Franklin Templeton fiasco, as you know, was an extended episode causing anxiety for many debt mutual fund investors. Finally, here is some respite for unitholders of the six debt mutual fund schemes that were wound up last year…
The Supreme Court has dismissed all petitions challenging the validity of the e-vote for winding up of six debt mutual fund schemes of Franklin Templeton mutual fund (FTMF), thus paving way for liquidation and eventually, the distribution of assets to the unitholders in the respective schemes.
As per the apex court’s order, FTMF will start distributing the first tranche of funds, i.e. Rs 9,122 crore (cash available for distribution as of January 15, 2021) to the aggrieved unitholders during the week of February 15, 2021.
The court has appointed SBI Funds Management to undertake the liquidation and distribution of assets.
Payments to unitholders will be made out for five out of six schemes that have turned cash positive. These are Franklin India Ultra Short Bond Fund (FIUBF), Franklin India Low Duration Fund (FILDF), Franklin India Short Term Income Fund (FISTIP), Franklin India Credit Risk Fund (FICRF), and Franklin India Dynamic Accrual Fund (FIDAF).
Distribution of funds from Franklin India Income Opportunities Fund (FIIOF), which has AUM of Rs 1,742 crore as on January 29, 2021 and an outstanding borrowing at around 5% of the AUM, can only commence once it has repaid its borrowings.
Table: Scheme wise detail of amount to be distributed to unitholders in the first tranche
|Scheme||Amount (in Rs crore) available for distribution as of January 15, 2021||AUM (in Rs crore) as of January 29, 2021||% of AUM that will be distributed in the first tranche|
|Franklin India Ultra Short Bond Fund||5,075.39||10,220||49.66%|
|Franklin India Low Duration Fund||1,625.36||2,595||62.63%|
|Franklin India Short Term Income Fund||469.24||5,609||8.37%|
|Franklin India Credit Risk Fund||926.15||3,668||25.25%|
|Franklin India Dynamic Accrual Fund||1,025.45||2,578||39.78%|
(Source: Franklin Templeton Mutual Fund)
The distribution process is as follows…
If you are a unitholder whose account is KYC compliant, you will start receiving funds from February 15 onwards depending on the number of units you held. If PAN/KYC, FATCA/UBO, Minor through guardian or Transmission details / documentation are not available with the AMC or is invalid, FTMF will distribute the funds after completion of the regulatory/ compliance requirements. You can check the account status for payout of the wound up scheme/s here.
The value that you receive will be based on the number of units you held in the particular scheme, the % of AUM that is available for distribution in the scheme, and the Net Asset Value (NAV) recorded on the day the payment is processed. The proportionate number of units you held will be extinguished to that extent after the payment.
SBI Funds Management will credit the proportionate amount electronically to all eligible unitholders from the bank accounts (one per scheme) it has opened for this purpose. In case the unitholders’ bank account is not eligible for an electronic payment, a Demand Draft/Cheque will be issued and sent to the registered address.
For NRI investors, FTMF will be responsible for deduction of TDS and issuance of TDS certificates.
Unitholders will receive the account statement from Franklin Templeton showing the details of units extinguished and payment amount made. The fund house will also make available the capital gains statement.
A substantial portion yet to be recovered
The remaining assets, which stands at around Rs 17,000 crore (including assets from FIIOF) will be distributed in subsequent tranches while ensuring that unitholders get optimum value from the underlying securities. This will be done in a staggered manner over time depending on the values realized from maturities, part payments, pre-payments, and coupons.
It is still a long way to go before unitholders receive their entire money back. Still there’s hope, as the saying goes ‘Well begun is half done’.
This article first appeared on PersonalFN here