PremiumNEW DELHI: Asset management company (AMC) Franklin Templeton Asset Management (India) Pvt. Ltd has said it strongly disagrees with the findings in the Securities and Exchange Board of India (Sebi) order and intends to file an appeal with the Securities Appellate Tribunal (SAT).
This came after the markets regulator on Monday barred Franklin from offering debt plans for two years and ordered it to refund management and advisory fees totaling Rs512 crore on six shut debt schemes for violating regulations while closing them. Sebi also imposed a penalty of Rs5 crore for violating various sections of the Sebi Act.
In its investigation, Sebi found serious lapses and violations such as replicating high-risk strategy across several schemes, pushing long-term papers into short-duration schemes and failing to exercise exit options in the face of emerging liquidity crisis, among others.
Reacting to Sebi’s order, a Franklin spokesperson said, “We place great emphasis on compliance and believe that we have always acted in the best interest of unitholders and in accordance with regulations. Our commitment to India remains steadfast. As stated previously, the decision by the Trustee in April 2020 to wind up the funds was due to the severe market dislocation and illiquidity caused by the covid-19 pandemic and was taken with the sole objective of preserving value for unitholders."
The company said the six schemes, being wound up, have distributed ₹14,572 crore to unit-holders as of 30 April 2021 and an amount of ₹3,205 crore is available for distribution as of 4 June. “After this distribution in the first week of June 2021, the total amount disbursed will range between 40% and 92% of AUM as of 23 April 2020 across the six schemes. Including the amounts available as of 4 June 2021 for distribution, 71% of the AUM as of 23 April 2020 will have been returned to unitholders in total across all the schemes," the spokesperson added.
According to the company, the current net asset value of each of the six schemes is higher than it was on 23 April 2020. “We believe this supports the decision made by the Trustee in consultation with the AMC and its investment management team to wind up the six schemes."
Franklin Templeton’s immediate priority and focus remains on supporting the court-appointed liquidator in liquidating the portfolio of the schemes, being found up, and distributing monies to the unit-holders at the earliest, while preserving value.
“The schemes have followed a consistent strategy of investing in credits across the rating spectrum and have delivered meaningful outcomes to investors over long periods of time. These schemes provided an important source of funding to growing companies in India that to date have proven to be sound investments. Many of these holdings are now being liquidated by the schemes at fair value under normal market conditions," the company further said in response to Sebi’s order.
In a separate statement, former head of Franklin Templeton Asia Pacific Vivek Kudva said he is reviewing the order and may consider challenging it before SAT.
Sebi has directed Kudva and his wife Rupa to transfer Rs30.70 crore of redeemed FT units to an escrow account within 45 days. The market regulator has also barred them from accessing the securities market for a year and fined them a total of Rs7 crore.
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