Default in payments by a Rivaaz Trade Ventures Pvt. Ltd on 31 August has forced Franklin Templeton AMC to mark its debt down to zero. Four Franklin schemes are exposed to the company with exposure ranging from 0.33% to 6.32% of assets. In a note to investors, the AMC added that Future Group has proposed to repay the debt from its stake sales to Reliance Retail.
The four schemes exposed are Franklin India Credit Risk Fund, Franklin India Dynamic Accrual Fund, Franklin India Income Opportunities Fund and Franklin India Short Term Income Plan with exposures at 0.33%, 3.02%, 6.32% and 5.02%, respectively, of scheme assets on 30 August.
Franklin Templeton had previously marked down these exposures by 25%, meaning that actual exposures initially stood up to 8.4% of assets. Overnight, the schemes suffered cuts of 0.03%, 2.94%,6.49% and 5.20%, respectively.
A note released by Franklin Templeton Mutual Fund stated that Future Group has proposed to repay the debt in question from the proceeds of its stake sales to Reliance Retail.
On 29 August, Reliance Retail announced the acquisition of the retail and wholesale business as well the logistics and warehousing business of the Future Group for ₹24,713 crore. As part of the acquisition, Future Group is amalgamating various group companies into Future Enterprises and thereafter will sell these businesses to Reliance Retail, on a slump sale basis.
However, the proposed restructuring and slump sale will be subject to approvals by the National Company Law Tribunal (NCLT), the Competition Commission of India, the Securities and Exchange Board of India (Sebi), stock exchanges, shareholders and creditors of the transferor and transferee companies.
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