Franklin MF update: 6 debt funds under winding up get nearly Rs 1,500 cr between Aug 15-31

Cash position in Franklin India Ultra Short Bond Fund and Franklin India Dynamic Accrual Fund rose to 31% and 14% of their AUM, respectively

Kumar Shankar Roy Sep 3, 2020

Debt FundsAfter a quiet collection phase in the first part of August, Franklin Templeton Mutual Fund’s six debt funds – which are under winding up – received nearly Rs 1,500 crore from maturities, pre-payments, and coupon payments during the period 15-31 August. This takes the total cash flows received to date from April 24 to Rs 6,486 crore as on August 31 (from Rs 5,000 crore on August 14).

Out of the six debt schemes, four schemes have no loans at all which means they can start paying investors some money the moment the court decide on the winding up matter. Franklin India Low Duration Fund (FILDF) and Franklin India Credit Risk Fund (FICRF) are the latest schemes to turn cash positive with 5% and 1% of their respective AUM available in cash to distribute to unitholders subject to a successful unitholder vote. Cash position in Franklin India Ultra Short Bond Fund (FIUBF) and Franklin India Dynamic Accrual Fund (FIDA) rose to 31% and 14% of their respective AUMs as of August 31, 2020.

Please note that the e-voting and unitholders meet continue to remain suspended till the embattled fund-house receives further directions from the Karnataka High Court. Active monetisation of assets of the schemes and distribution of investment proceeds to the unitholders will be possible only after successful e-voting, as per the AMC. However, some investors including the petitioners have contested this argument, saying the AMC is free to distribute monies to unitholders and it’s not necessary to get a court nod for it.

As things stand now, below is a graphic of the maturity profile of each scheme and how soon they can return money to investors if the schemes only pay you when the maturity of securities occurs.

Franklin Templeton MF debt schemes maturity

Here are the details of each of the 6 debt funds.

1. Franklin India Ultra Short Bond Fund

The Rs 9,931-crore Franklin India Ultra Short Bond Fund is a cash-positive scheme and it can return 31% of the respective AUM available in cash to unitholders subject to a successful unitholder vote. Between August 15 to 31, a total of Rs 940 crore was realised by the ultra-short duration fund from maturity receipt and applicable put option facility from Vedanta and Motilal Oswal Home Finance.

In terms of top-5 group wise exposure, Franklin Ultra Short Bond Fund is most exposed to CLIX 9.32%, followed by Indostar 8.31%, Edelweiss Capital 7.44%, Tata 6.76% and JM Financial 5.45%.

2. Franklin India Low Duration Fund

The borrowing situation for Rs 2,442-crore Franklin India Low Duration Fund has changed from 1% assets under management as loans on August 14 to now cash-positive. While in August 1-14 period the fund did not witness any inflow from securities matured/ sold/ prepaid, in Aug 15-31 period, the scheme saw Rs 136.50 crore coming in from Vedanta and Motilal Oswal Home Finance on account of maturity receipt & applicable put option facility.

In terms of top-5 group wise exposure, Franklin India Low Duration Fund is most exposed to Renew 16.26%, followed by JM Financial 14.31%, Vedanta 9.97%, Esskay 8.57% and Small Business Fincredit 7.17%.

3. Franklin India Short Term Income Plan

This is the 2nd biggest debt fund among the six schemes being proposed to be shuttered by the AMC. The Rs 5,134-crore Franklin India Short Term Income Plan remains one of the highest leveraged schemes in terms of borrowings. As a percentage of AUM, outstanding borrowings are 23% for the fund remained unchanged at 23% on August 31 compared to August 14 status. The scheme received Rs 33 crore, as part-payment from Esskay on August 31. Despite this, the AUM of the fund has dropped compared to August 14. This may be linked to valuation of securities it held.

In terms of top-5 group wise exposure, Franklin India Short Term Income Plan is most exposed to Shriram Transport 14.64%, followed by Renew 12.96%, Edelweiss Capital 10.43%, UP Power Corporation 10.39% and Andhra Pradesh Capital Region Development Authority 9.38%.

4. Franklin India Income Opportunities Fund

The Rs 1,560-crore Franklin India Income Opportunities Fund suffers the ignominy of the highest leveraged scheme among the six being shuttered. Over three months since the winding up announcement, the fund as a percentage of AUM has outstanding borrowings of 38% as on August 31, up 100 basis points from 37% on August 14. Like in the previous August 14 dated update, the scheme did not receive a single rupee from securities matured/ sold/ prepaid between August 15 to 31. Also, the fund saw its AUM go down.

In terms of top-5 group wise exposure, Franklin India Income Opportunities Fund is most exposed to Tata 18.61%, followed by Ajay Piramal 16.18%, Shriram Transport 11.93%, UP Power Corporation 11.68% and Hinduja 8.21%.

5. Franklin India Credit Risk Fund

The Rs 3,376-crore Franklin India Credit Risk Fund has turned cash-positive on August 31, from about 4% of AUM in borrowings on August 14. The scheme received Rs 110 crore from Vedanta on August 17 maturity of debt.

In terms of top-5 group wise exposure, Franklin India Credit Risk Fund is most exposed to Shriram Transport 12.87%, followed by UP Power Corporation 10.12%, Andhra Pradesh Capital Region Development Authority 9.15%, Five Star Business Finance 7.20% and Kedara Capital 6.87%.

6. Franklin India Dynamic Accrual Fund

The Rs 2,415-crore Franklin India Dynamic Accrual Fund also do not have outstanding borrowings. As a cash-positive fund, it can immediately return 14% of AUM once the e-voting on winding up is cleared. The scheme received Rs 32 crore from pre/part-payments and maturities between August 15 to 31 from Vedanta and Ess Kay Fincorp.

In terms of top-5 group wise exposure, Franklin India Dynamic Accrual Fund is most exposed to Shriram Transport 10.14%, followed by Ajay Piramal 7.97%, Tata 7.51%, UP Power Corporation 7.50% and Vedanta 6.93%.

Related:

Fresh hit for four Franklin MF debt funds as another Future group co defaults

Winding up debt schemes: Franklin Templeton currently reviewing SEBI forensic audit findings

Franklin Templeton caps daily inflows in its 3 fund of funds; move to curb arbitrageurs

Franklin update: 6 schemes collected Rs 708 cr in August 1-14; roughly Rs 5,000 cr so far


Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. Kumar is a financial journalist, with a functional experience of 15 years. He tracks mutual funds, insurance, pension, PMS, fixed income/debt and alternative investments markets closely. He has worked for The Times of India, The Hindu Business Line, Deccan Chronicle Group, DNA, and Value Research, among others, across different cities in India. He is deeply interested in marrying data insights with actionable opinion. He can be contacted at kumarsroy@rupeeiq.com.

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