Franklin’s shuttered schemes receive Rs 1,005 crore in July, says Sanjay Sapre

Sanjay Sapre, President, Franklin Templeton Mutual Fund, has written to investors that the six shuttered debt mutual fund schemes continue to receive cash flows. “From April 24 till July 31, 2020 the schemes have received INR 4,280 crore from maturities, pre-payments, and coupons. From July 1 till July 31, 2020 the schemes have received cash flows of Rs 1,005 crore from various issuers,” Sapre said in a note to investors.

Franklin Templeton Mutual Fund shut six debt mutual funds on April 23, citing the adverse conditions in the bond market due to Covid-19 pandemic. The decision has been challenged in court. Sapre informed investors that the e-voting and the unitholders meet continue to remain suspended till they get further directions from the Karnataka High Court.

Sapre, who has been regularly updating investors about the progress made by the schemes, also touched upon the defaults and downgrades faced by some of the shut schemes this week. Four among the six shuttered debt schemes of Franklin Templeton Mutual fund saw a fall in their Net Asset Values after two entities – Nufuture Digital (India) Ltd (NDIL) and Future Ideas Co Ltd (FICL) – defaulted on payments.

“Due to default in payment, the securities of FICL and NDIL have been valued at zero, basis AMFI prescribed standard hair cut matrix and interest accrued and due has been fully provided. Securities of RTVPL will continue to be valued at 75%, basis recommended valuation. We wish to reiterate that these valuations only reflect the realizable value and do not indicate any reduction or write-off of the amount repayable by these companies,” Sapre said.

Sanjay Sapre also responded to the question whether the AMC should pay borrowings before paying the investors back.

“Many of you have asked why borrowings should be paid before paying investors. Regulation 41 of SEBI (Mutual Funds) Regulations, 1996 lays out the procedure and manner of winding up of a mutual fund scheme. The regulations require that the proceeds realized, shall be first utilized towards discharge of due liabilities (including borrowings) of the scheme. I would also like to clarify that AUM of the scheme is shown net of borrowings by the scheme. Repaying the borrowings neither impacts the AUM nor the NAV of the schemes. NAV or AUM represents the net assets of the scheme after reducing liabilities and expenses. Therefore, repayment of borrowings does not impact AUM or the NAV,” he said.


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