Franklin Begins Repayment to Investors in Shut Debt Funds

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Mumbai: After a wait of more than 10 months, investors in five of the six shuttered debt schemes of Franklin Templeton Mutual Fund received on Tuesday a portion of their money, which was lying as cash in these schemes.

The fund house disbursed a total of ₹9,122 crore in the five cash positive schemes. Unitholders of Franklin Templeton Ultra Short Term Fund got ₹5,075 crore and in Low Duration Fund got ₹1,625 crore. Dynamic Accrual Fund’s unitholders got ₹1,025 crore, while Short Term Income Fund’s unitholders got ₹469 crore and Credit Risk Fund’s unitholders got ₹926 crore. Unit holders of Franklin’s Income Opportunities Fund are yet to receive any cash as the scheme was not cash positive as on January 15.

After the disbursement of money on Monday, the six schemes still have debt securities worth ₹17,000 crore. The Supreme Court has directed SBI Mutual Fund to liquidate these and distribute the proceeds. The apex court said the sale should be undertaken with caution as an attempt to offload the securities in haste can cause a loss.

“Four to five schemes should be able to repay entire amount within a year. In the case of 1-2 schemes, a small percentage of debt securities may take longer to sell,” said Amol Joshi, founder, Plan Rupee.

About 3,00,000 investors in these six debt mutual fund schemes, which have assets of ₹26,000 crore, have been hit since April 23, 2020, when the fund house decided to wind up these schemes on account of poor liquidity conditions in debt markets after Covid-19 outbreak.

Investors have been unable to access their money in these schemes as the winding up was challenged in courts and there was a stay order, which prevented the fund house from distributing or monetising any assets in the schemes.

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