Forensic audit report findings not final, says Franklin Templeton

Clarifies that employees who made investments in the six wound-up schemes continue to hold substantial investments in these schemes

The findings of the forensic audit are not final and might change based on clarifications provided by Franklin Templeton to auditors, the asset manager told unitholders in a letter sent on Wednesday.

“The reports regarding the findings of the forensic audit/inspection are misleading, and we believe that it is improper to make any publication regarding the forensic audit/inspection report as the matter is under the consideration of the Karnataka High Court,” said Sanjay Sapre, president of Franklin Templeton India.

He clarified that employees who invested in the six schemes continue to have substantial holdings in them. The decision to exercise a ‘put’ option rests with the investment management team, which takes various factors into account to maximise recovery of proceeds when making such a decision. Exercising a ‘put’ was not the only available option, said Sapre.

“Some reports specifically call out investments made in certain issuers where we did not exercise a ‘put’ option. However, these reports ignore the fact that Franklin Templeton has already initiated legal recovery proceedings in the case of some of these issuers,” Sapre said.

Reports had suggested that Franklin Templeton had not exercised put options in papers belonging to Essel Group and Reliance group companies, among others, despite a ratings downgrade. A ‘put’ option gives the holder the right to sell a particular asset at a particular time and price.

He clarified that part of the total cash of Rs 8,262 crore that had been received from maturities, prepayments and coupons from the six schemes as of September 30 had been utilised to repay borrowings. The asset manager had Rs 5,084 crore available for distribution to unit holders in four cash positive schemes — Franklin India Ultra Short Bond Fund, Franklin India Dynamic Accrual Fund, Franklin India Low Duration Fund, Franklin India Credit Risk Fund — subject to fund-running expenses.

“The cash flows received so far are without the ability to efficiently monetise assets, which will only be possible after successfully completing the e-voting process. I would also like to remind you that we have placed all the information regarding the funds in the public domain and update this information every two weeks — cash flows received, detailed scheme-wise portfolios, upgrades or downgrades, changes to the maturity profile, put/call options exercised, etc, in an endeavour to assure investors that we continue to act in a transparent manner in their best interest,” said Sapre.