Franklin MF marks down its entire Vodafone Idea investments to zero

By: |
Published: January 18, 2020 2:56:20 AM

Even as the rating on the debt instruments of Vodafone Idea remain above investment grade, Franklin MF marked down its investments as the current situation remains unclear.

vodafone, vodafone ideaFranklin Templeton MF, has investments of over Rs 2,050 crore in Vodafone Idea as on December 2019.

Franklin Templeton Mutual Fund has marked down its entire investments to zero in all debt schemes that held the papers of Vodafone Idea after the Supreme Court refused to grant relief to telecom operators seeking breather on the adjusted gross revenue dues payout. This move by the fund house led to a fall in net asset value (NAV) of various debt schemes between 4% and 6% on Thursday.

Franklin Templeton MF, has investments of over Rs 2,050 crore in Vodafone Idea as on December 2019. The fund house has also limited fresh inflows into schemes holding debt instruments of Vodafone Idea. Schemes such as Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund and Franklin India Short Term Income Plan, among others, have invested in debt instruments issued by Vodafone.

Asset management companies have an exposure of nearly Rs 3,389.77 crore to the debt papers issued by Vodafone Idea as of December 2019, shows data from Value Research. Other funds such as Nippon India MF, Aditya Birla Sun Life MF and UTI MF also have investments in Vodafone Idea. FE has learned that several other fund houses are also looking at writing down their exposure in Vodafone Idea.

Even as the rating on the debt instruments of Vodafone Idea remain above investment grade, Franklin MF marked down its investments as the current situation remains unclear.

“Securities of Vodafone Idea Limited (VIL) held in various fixed income schemes of Franklin Templeton have been marked down to zero. Clarity may take some time to emerge even if the company takes recourse to a curative petition or other measures available to it. The schemes will continuously monitor developments in VIL and take appropriate steps to recover the investment proceeds in the best interest of its unit holders. Fresh inflows, for transactions into these schemes have been limited to Rs 2 lakh per investor,” said a spokesperson from Franklin Templeton. While the fund house will review these decisions on a regular basis and take appropriate action as clarity emerges.

Any debt paper, which is equal or above BBB-, is considered as above investment grade while lower to that are considered below investment grade. According to Franklin MF, Vodafone Idea has ratings of BBB- (Rating watch with negative implications) by Crisil Ratings. Debt funds collectively have an exposure of Rs 6,887.79 crore in Vodafone Idea, Bharti Airtel and Tata Teleservices as on December 2019, shows data from Value Research. Market participants say that now all eyes will be on the government to give some relief in this matter. “Apart from filing a curative petition, telecom companies have the only option to approach the government which might give them some relief in terms of the payment,” said a debt fund manager on condition of anonymity.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Next Stories
1No impact of NCLAT ruling removing N Chandrasekaran on TCS: Rajesh Gopinathan
2L&T Finance net profit marginally up at Rs 591 crore in Q3
3From Nestle to Walmart to Unilever, how world’s top companies are going plastic-free in 2020