Franklin Templeton Mutual Fund’s six debt funds – which are under winding up – collected Rs 438 crore from maturities, pre-payments, and coupon payments during the period 16-29 October 2020.

With this, the total cash flows received by the 6 schemes till date since 24 April 2020 to Rs 8,741 crore.

The recoveries give hope to investors, stuck for many months, that their money in schemes is somewhat intact.

Read on to know more.

Cash for distribution

The total cash available with the 6 schemes stands at Rs 5,441 crore as of October 29, 2020. Do note the cash is for the four cash positive schemes, subject to fund running expenses.

Individually, Franklin India Ultra Short Bond Fund (FIUBF), Franklin India Low Duration Fund (FILDF), Franklin India Dynamic Accrual Fund (FIDA) and Franklin India Credit Risk Fund (FICRF) have 42%, 25%, 20% and 5% of their respective AUM in cash.

Borrowing levels in Franklin India Short Term Income Plan (FISTIP) and Franklin India Income Opportunities Fund (FIIOF) continue to come down, but they are not cash positive yet.

Read – Karnataka HC tells Franklin to seek unitholders’ consent for winding up 6 debt funds; what next?

When will money be returned

The Hon’ble Karnataka High Court has upheld the authority and decision taken by the Trustees to wind-up the schemes under regulation 39(2)(a).

As per the judgement, for operationalizing such a decision, approval of the unitholders will be required under regulation 18(15)(c).

Franklin is expected to appeal the High Court decision. Along with this, it is expected to ask for approval to distribute cash lying in the 4 schemes to investors. Its been more than 6 months now that investors are stuck.

Irrespective of what the eventual Supreme Court decision will be, for each of the 6 schemes the maturity profile tells you when the money invested by the scheme comes back to it and then to you.

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.

1. Franklin India Ultra Short Bond Fund

The Rs 10,066-crore Franklin India Ultra Short Bond Fund is a cash-positive scheme and it can return 42% of the respective AUM available in cash to unitholders.

If the fund relies just on prepayments by companies, coupons etc. and cant sell the securities, FIUBF scheme will get all its money by April 30, 2025.

2. Franklin India Low Duration Fund

The Rs 2,485-crore Franklin India Low Duration Fund is cash-positive. It can return 25% of respective AUM now as its in cash.

If the fund relies just on prepayments by companies, coupons etc. and cant sell the securities, FILDF scheme will get all its money by April 30, 2025.

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 5,304-crore Franklin India Short Term Income Plan still remains a high leverage scheme in terms of borrowings. As a percentage of AUM, outstanding borrowings are 18% for the fund.

If the fund relies just on prepayments by companies, coupons etc. and cant sell the securities, FISTIP scheme will get all its money only beyond April 30, 2025.

4. Franklin India Income Opportunities Fund

The Rs 1,631-crore Franklin India Income Opportunities Fund continues to be the highest leveraged scheme. More than six months since the winding up announcement, the fund as a percentage of AUM has outstanding borrowings of 30%.

If the fund relies just on prepayments by companies, coupons etc. and cant sell the securities, FIIOF scheme will get all its money only beyond April 30, 2025.

5. Franklin India Credit Risk Fund

The Rs 3,481-crore Franklin India Credit Risk Fund can return 5% of AUM as cash to investors today if allowed to do so.

If the fund relies just on prepayments by companies, coupons etc. and cant sell the securities, FICRF scheme will get all its money only beyond April 30, 2025.

6. Franklin India Dynamic Accrual Fund

The Rs 2,475-crore Franklin India Dynamic Accrual Fund also does not have any outstanding borrowings. As a cash-positive fund, it can immediately return as high as 20% of AUM once the decks are cleared.

But if the fund relies just on prepayments by companies, coupons etc. and cant sell the securities, FICRF scheme too will get all its money only beyond April 30, 2025.

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 [email protected].

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