SC to hear Franklin Templeton debt fund case on Monday

NEW DELHI:  The Supreme Court is expected to consider the Franklin Templeton debt fund case on Monday, January 25, and decide on how the assets of the six closed debt funds will be distributed to investors or liquidated, according to reports. 

The Supreme Court had, on December 3, 2020, issued an interim order allowing the firm to seek the consent of unitholders for winding up the six schemes. However, while the asset management firm said last week that an “overwhelming majority” of the unit-holders in the funds had voted for winding down the schemes, the SEBI-appointed observer in his report had highlighted instances where there were “significant  variations in the e-voting process followed by FTMF”. 

According to the report, about 38 per cent of the unit-holders participated ‘on an overall basis’ in the e-voting. Reports also say that a group of investors have approached the apex court challenging the results of the e-voting process.  

Experts say it is unclear how these matters will inform the court’s decision. The Supreme Court is slated to decide on how the funds in the six schemes are to be distributed to the unit-holders. 

As of December 31, 2020, the six schemes that had been shut down had received Rs 13,120 crore from maturities, pre-payments, and coupons.  

Currently, five out of the six closed down schemes are cash positive and sources say that there is Rs 8,527 crore  in these five schemes that can be returned to unit-holders. 

Inflows into the six closed down schemes has risen steadily over the past few months, with the amount of money received by the six schemes over 40 per cent higher than what was expected in the maturity profile that was published for April 23, 2020.

The only scheme that still has outstanding borrowing—Franklin India Income Opportunities fund—has also recorded substantial improvement, with outstanding borrowing steadily coming down from 37.55 per cent as on April 24, 2020, to 6 per cent at the end of December 2020.