Franklin Templeton repays investors of all suspended debt schemes

Franklin Templeton India returned Rs 27,109 crore to investors of six debt schemes that were unexpectedly closed due to significant redemption pressure caused by a liquidity crisis in the debt market during the Covid pandemic breakout in April 2020. 

As of July 31, the payments made to investors account for 108% of the aggregate reported AUM value across the six funds as of April 23, 2020. On Tuesday, a spokesperson for the fund house stated that five out of the six schemes have liquidated all performing assets and fully extinguished all units. 

As of April 24, 2020, the funds had combined assets under management (AUM) of approximately Rs 25,215 crore. During each distribution, the Net Asset Value (NAV) of each scheme was higher than its value in April 2020. 

The total amount returned to investors falls within the range of 100% to 113% of the respective reported AUM values of the six funds as of April 2020. 

The Trustee of Franklin Templeton Mutual Fund in India made a challenging decision to wind up these funds voluntarily. The main purpose behind this decision was to safeguard the value for fund unit holders by carrying out a carefully managed sale of the funds’ portfolios, as stated by the spokesperson. 

In April 2020, Franklin Templeton India Mutual Fund surprised investors by suddenly closing six debt funds. The fund house made the announcement on April 23, 2020, stating that it was winding up the following six debt schemes those were Franklin India Ultra Short Bond Fund (FIUBF), Franklin India Low Duration Fund (FILDF), Franklin India Short Term Income Plan (FISTIP), Franklin India Income Opportunities Fund (FIIOF), Franklin India Credit Risk Fund (FICRF), and Franklin India Dynamic Accrual Fund (FIDAF). 

In November 2020, the capital markets regulator, Sebi, issued a show-cause notice to the company in response to its decision in April 2020 to wind up six debt schemes, which held assets under management (AUM) worth Rs 25,000 crore and had a total of 3 lakh investors. The decision to wind up these schemes was attributed to liquidity challenges arising from the pandemic. 

In the month of June, the fund informed will disburse a total amount of Rs 178.06 crore to investors. This included a payment of Rs 39.27 crore to investors of Franklin India Short Term Income Plan (FISTIP) and Rs 138.79 crore to investors of Franklin India Credit Risk Fund (FICRF). 

After this payout, Franklin Templeton would have paid a cumulative amount to the tune of Rs 27,109.34 crore. All six schemes had paid more than 100% of the schemes that are assets under management at the time of winding them up.