Investors may lose money if wind-up spurned, says Franklin Templeton

Mutual Fund on Monday said it has sought consent of the unitholders for the orderly winding up of the six fixed income schemes.

The electronic voting will take place from December 26-28 and the meeting of unitholders of relevant schemes on December 29, MF sais. The unitholders would have to take a call on whether to give consent to the winding up decision or withholding it, which would allow the schemes to reopen for purchase and redemption.

The move comes after Supreme Court on Thursday asked MF to initiate steps within one week for calling a meeting of unit holders to seek their consent for closure of six mutual fund scheme. Franklin Templeton MF said the objective of the voting exercise is to seek, by “simple majority”, consent of the unitholders for the decision made by the trustee of the fund house to wind up the six fixed income schemes in an orderly fashion.

Consent will be sought from unitholders for each scheme separately. Fintech has been entrusted by the fund house to carry out the electronic voting process. Franklin Templeton MF believes that it will be beneficial for unitholders to vote “Yes” to the proposed resolution as this will allow schemes to monetise assets without resorting to distress sales and will maximise value to unitholders.

ALSO READ: Sensex, Nifty end at new all-time high for third day amid vaccine optimism

“If the decision to wind up the schemes in an orderly manner is not implemented, it would precipitate a rush of redemptions, which would force a distress sale of the portfolio securities, likely resulting in a reduction in the net asset value (NAV) of the schemes and substantial losses for unitholders,” the fund house noted.

Franklin Templeton MF closed six debt mutual fund schemes on April 23, citing redemption pressure and lack of liquidity in the bond market. The schemes are Franklin India Low Duration Fund, Franklin India Ultra Short Bond Fund, Franklin India Short Term Income Plan, Franklin India Credit Risk Fund, Franklin India Dynamic Accrual Fund, and Franklin India Income Opportunities Fund.

From April 24 to November 27, the schemes under winding up have received over Rs 11,576 crore from maturities, pre-payments, and coupons. Of this, the schemes have received Rs 2,836 crore in November. The cash available stands at Rs 7,226 crore as of November 27 for the four cash positive schemes, subject to fund running expenses.

Sanjay Sapre, president, Franklin Templeton-India, said: “Unitholders’ vote in favour of the orderly winding up will allow us to maximise return of investment value without resorting to an emergency liquidation of securities. The opportunity to liquidate assets at fair value will increase with time in a normal market environment.”

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor