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

The embattled fund-house is hoping that the Reliance-Future retail deal will help Biyanis to repay the debt

Kumar Shankar Roy Sep 1, 2020

debt defaultAdding to the woes of the troubled mutual fund asset manager Franklin Templeton, Future Group company Rivaaz Trade Ventures Pvt Ltd (RTVPL) has defaulted on its scheduled debt obligation, forcing four of the six debt schemes of Franklin to value the RTVPL exposure at zero on the basis of industry-standard hair cut matrix.

Following the write down, on August 31, the NAV of Franklin India Credit Risk Fund fell 0.03%, Franklin India Dynamic Accrual Fund fell 2.94%, Franklin India Short Term Income Plan fell 4.95% and Franklin India Income Opportunities Fund fell 6.10%.

The four schemes viz. Franklin India Credit Risk Fund, Franklin India Dynamic Accrual Fund, Franklin India Short Term Income Plan and Franklin India Income Opportunities Fund have between 0.33% to 6.32% AUM exposure to RTVPL.

Future Group debt to mutual funds

Rating agencies in late July had downgraded the ratings of non-convertible debentures (NCDs) of Rivaaz Trade Ventures, Nufuture Digital and Future Ideas (all 3 are Future Group entities). Soon, Nufuture Digital and Future Ideas had defaulted.

Now, Rivaaz Trade ventures has also defaulted. This led to valuing the company’s NCD to zero. “This valuation only reflects the realizable value on the date of valuation and does not indicate any reduction or write-off of the amount repayable by RTVPL to the schemes,” Franklin Templeton MF said.

Rivaaz Trade Ventures buys/builds/acquires moveable/ immoveable fixed assets conducive to the retail business and leases them to companies in the retail business on the basis of a long-term operating lease. The company is also involved in the trading business. RTVPL acquires fixed assets, such as furniture and fixtures, computer peripherals and networking, electrification and electric installation, air conditioning and visual merchandising on the specifications provided by these retailers and leases these fixed assets to the companies on the basis of a long-term operating lease.

Franklin MF is hoping the nearly Rs 25,000-crore deal between Mukesh Ambani’s Reliance Group and Kishore Biyani’s Future Group to help. Reliance Industries, through its retail subsidiary, Reliance Retail Venture Limited (RRVL), is acquiring Future Group’s Grocery and Apparel Retail formats on slump-sale basis at Rs 24,700 crore. As per expert understanding, the deal is likely to be structured in three steps. A) All of Future Group’s businesses would be transferred to Future Enterprises (FEL). B) Reliance Industries (RIL) would then acquire the Grocery and Apparel Retail assets from FEL for Rs 24,700 crore. C) FEL would retain the FMCG & Apparel brands, the Future Generali Insurance JV, and select real estate assets, in which RIL would take an additional 13% stake in two parts for Rs 2,800 crore.

“Based on the representations received from the Future Group, we understand the NCDs held by the FTMF are proposed to be repaid from proceeds of the transaction….we believe the proposed sale announcement is a positive development for the NCDs held by the schemes of FTMF. We are closely tracking developments around the same,” the fund-house added.

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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