Franklin defends investment decisions, says employees still hold investments in shut schemes

In a latest update to investors in six shuttered debt mutual fund schemes, Sanjay Sapre, President, Franklin Templeton Asset Management (India), defended the fund house’s decision to not exercise “put” option in papers. He also reiterated that employees who made investments in the six shut schemes continue to hold substantial investments in them.

“Over the last few days, several media outlets have carried reports on certain observations made in the forensic audit conducted by SEBI. Claims have been made that “Some officials redeemed investments before winding up” suggesting wrong doing or insider trading, and that “Franklin Templeton did not exercise put options in papers despite ratings downgrade”, suggesting there were some reasons beyond the exercise of normal business judgement for such an action,” Sapre stated in his update.

“The decision to exercise, or not to exercise a “put” option rests with the investment management team. The team takes various factors and options into account in order to maximize recovery of investment proceeds when making such an investment related decision and exercising a put is not the only available option. All such decisions are taken with an aim to achieve the best possible outcome for our investors,” added Sapre.

Speaking about some media reports on observations made in the forensic audit conducted by Sebi, Sapre termed those reports ‘unsubstantiated.’ “Besides the fact that the reports regarding the findings of the Forensic audit/inspection are misleading, we believe that it is improper to make any publication regarding the Forensic audit/inspection report as the matter is under the consideration of the Hon’ble Karnataka High Court,” Sapre said in the letter.

Sapre also said while several articles quote the forensic audit report findings, “the auditors themselves have acknowledged in their original submission to SEBI that the report is subject to modification basis explanations and responses to be provided by Franklin Templeton.”

“Some reports specifically call out investments made in certain issuers where we did not exercise a put–option. However, these reports ignore the fact that Franklin Templeton has already initiated legal recovery proceedings in the case of some of these issuers,” Sapre said.

In his last communication, Sapre had told investors that from April 24 till September 30, 2020, the total cash received from maturities, pre-payments and coupons across the six schemes stands at Rs 8,262 crores. “Part of this amount has been utilized to repay borrowings and post repayment, as of September 30, 2020, we have INR 5,084 crores available for distribution to unitholders in four cash positive schemes,” said Sapre.


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