As on July 31, 2020, while two schemes were already cash positive, the borrowing levels in other schemes continued to come down steadily.
Franklin Templeton Mutual Fund said it continues to receive cash flows from maturities, pre-payments and coupons in the six debt schemes that were closed in April. In July, the fund house received cash flows of Rs 1,005 crore from various issuers. From April 24 to July 31, the schemes have received Rs 4,280 crore from various debt securities.
Sanjay Sapre, president at Franklin Templeton Asset Management (India), in his letter to investors on Wednesday said cash flows have been received without the ability to efficiently monetise assets. The schemes will attempt to accelerate monetisation after the successful completion of the e-voting exercise and the unitholders’ meet, which can only take place after the completion of the legal process.
The e-voting and the unitholders’ meet will remain suspended till the fund house gets further directions from the Karnataka High Court, and efficient monetisation of assets of the schemes and distribution of investment proceeds to unitholders will be possible only after successful e-voting. The Karnataka HC will commence hearing on the case on August 12.
As on July 31, 2020, while two schemes were already cash positive, the borrowing levels in other schemes continued to come down steadily. Franklin India Low Duration Fund and Franklin India Credit Risk Fund now have an outstanding borrowing of only 1% and 4% of their assets under management (AUMs), respectively.
On April 23, six debt schemes collectively worth Rs 25,800 crore were wound down by Franklin Templeton MF due to the severe market dislocation and illiquidity caused by the Covid.
On July 31, coupon and part maturity payments were to be paid by three issuers — Rivaaz Trade Ventures (RTVPL), Nufuture Digital (India) (NDIL) and Future Ideas Co (FICL) — on various non-convertible debentures (NCDs) issued by them. RTVPL met its payment obligations, but FICL and NDIL were unable to do so.
“Due to default in payment, the securities of FICL and NDIL have been valued at zero, basis Association of Mutual Funds in India (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,” said Sapre in the letter. All these three issuers belong to the Future Group.
The fund house also said Franklin India Short Term Income Plan and Franklin India Corporate Debt Fund are invested in ‘Reliance Broadcast 9.50% (Series C) 20-Jul-2020’ secured NCDs, issued by Reliance Broadcast Network (RBNL) having a put option on Reliance Capital.
“On maturity, the issuer was unable to meet the maturity obligations (including interest). We are in the process of initiating appropriate enforcement action to recover dues from the issuer and other connected parties. The schemes will continuously monitor the developments in RBNL,” said Sapre in the letter.