SC orders Rs 9,122 cr payment to investors in Franklin's six shut schemes

SBI MF entrusted with disbursing amount, money to be paid in 20 days and parties can move applications in case of difficulties arising out of the process

The Supreme Court on Tuesday directed Franklin Templeton Mutual Fund to disburse Rs 9,122 crore to the unitholders of its six shut debt schemes. SBI Mutual Fund has been entrusted the responsibility of disbursing the amount.

The money has to be distributed among unitholders in 20 days and the parties are at liberty to move applications in case of difficulties arising out of the process.

“We believe the distribution of monies will provide unitholders with much-needed liquidity and look forward to working with the regulator and SBI Mutual Fund to distribute the cash within the period stipulated by the Court,” said a Franklin Templeton spokesperson.

The six schemes had received a total cash flow of Rs 14,391 crore until January 29, 2021 from maturities, coupons, and prepayments.

The number of cash-positive schemes stands at five and these have Rs 9,770 crore cash available to return to the unitholders, subject to fund running expenses. The balance Rs 4,621 crore has been used to repay borrowings and interest thereon of the six schemes. 

Franklin India Low Duration Fund, Franklin India Ultra Short Bond Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, and Fran­klin India Short Term Income Plan have 65 per cent, 53 per cent, 41 per cent, 27 per cent and 11 per cent of their respective AUM in cash. 

The asset manager had shut six debt schemes on April 23 last year, citing redemption pressure and lack of liquidity in the debt market.

The apex court in December had issued an interim order allowing the trustees of the mutual fund to seek consent of the unitholders for winding up the six debt schemes under Section 18(15)(c) of the Sebi (Mutual Fund) Regulation, 1996. Redemptions would remain suspended until further notice.

In October, the Karnataka High Court had ruled Franklin Templeton trustees’ decision to wind up the schemes could not be implemented without nod from the unitholders. Last month, the investors in the six shut debt schemes had voted overwhelmingly in favour of their shutting down.

The asset manager has been assuring investors that the move would enable monetisation of the papers faster, while preserving the value of their investments as market conditions had become a lot more conducive.