Franklin’s ₹512 crore refund: Which scheme will get how much?

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Following market regulator SEBI’s order, Franklin Templeton will have to disgorge ₹512.50 crore worth investment management and advisory fees charged by the AMC on the 6 debt schemes being wound up. As things stand today, the total 3.15 lakh unitholders in the 6 Franklin debt funds can hope to get an average ₹16,300 from the ₹512.50 crore refund coming their way. This course of action can, however, change if the asset management firm in future can successfully argue against the disgorgement.

With the proposed disgorgement, unitholders in the schemes can expect to get between ₹41 crore to ₹153 crore depending on the specific scheme. The ₹512.50 crore total disgorgement includes ₹451.63 crore (fees taken from June 4, 2018 to April 23, 2020) and ₹60.87 crore interest at 12 per cent simple interest per annum (from April 24, 2020 to June 7, 2021).

Franklin India Short Term Income unitholders could get ₹153.1 crore, or 2.70 per cent of the fund’s assets under management (AUM) as on April 23, 2020, the date on which the fateful winding up decision was taken.

Franklin India Credit Risk unitholders will likely get a total of ₹114.41 crore (3.30 per cent of AUM), Franklin India Ultra Short Bond ₹93.35 crore (1.01 per cent), Franklin India Income Opportunities ₹55.59 crore (3.2 per cent), Franklin India Dynamic Accrual ₹54.85 crore (2.1 per cent) and Franklin India Low Duration ₹41.19 crore (1.58 per cent).

Appeal with SAT

As per SEBI order, Franklin Templeton Asset Management (India) has been directed to credit the amount charged from the six debt schemes inspected along with due interest back to the respective schemes, within a period of 21 days. Any delay will lead to more interest on the amount. On its part, Franklin intends to file an appeal with the Securities Appellate Tribunal (SAT).

Ever since the Trustee of Franklin Templeton decided to wind up six of debt schemes in April 2020, unitholders of schemes viz. Franklin India Ultra Short Bond Fund, Franklin India Low Duration Fund, Franklin India Short Term Income Plan, Franklin India Income Opportunities Fund, Franklin India Credit Risk Fund and Franklin India Dynamic Accrual Fund, have so far received ₹17,777.59 crore in 4 tranches.

If the disgorgement comes through, it will be an added inflow for investors who need to wait until 2025 and beyond to recover their investments across the schemes. This timeline is according to the current maturity profile and assumes that all securities will be held until maturity and all interest payments and principal repayments will be made in full.