Franklin debt funds collection gathers momentum by mopping up Rs 11,576 cr so far; Rs 2,836 cr collected in Nov alone

The cash available for distribution as of Nov 27 stands at Rs 7,226 cr for the four cash positive schemes, subject to fund running expenses

Kumar Shankar Roy   /   November 29, 2020
Franklin debt funds collection gathers momentum by mopping

Franklin Templeton Mutual Fund – whose six debt funds are under winding up procedure – has collected a whopping Rs 1,895 crore from maturities, pre-payments, and coupon payments during the period November 14 to 27. This is more than double of the Rs 941 crore collected in the previous fortnight, which was itself double of the amount collected by the 6 funds in October 16 to October 29 fortnight.

Cash registers ringing

With the Rs 1,895 crore collected in the latest period, the total cash flows received by the 6 debt schemes till date now stands at Rs 11,576 crore till 27 November 2020. Out of which, Rs 2,836 crore was received in the month of November. 

More importantly, out of the Rs 1,895 crore coming in, as much as 87% or Rs 1,664 crore was from pre-payments. A large proportion of pre-payments could indicate the strength of the borrowers who, even in a Covid-19 affected economy, are pre-paying debt. This should assuage some worries of investors about the portfolio health of the six embattled debt funds.

The cash available (for distribution) as of November 27, 2020 stands at Rs 7,226 crore for the four cash positive schemes, subject to fund running expenses.

Scheme level details

Individually, Franklin India Low Duration Fund, Franklin India Ultra Short Bond Fund, Franklin India Dynamic Accrual Fund and Franklin India Credit Risk Fund have 48%, 46%, 33% and 14% of their respective AUM in cash right now. These are the four cash positive schemes. 

Borrowing levels in Franklin India Short Term Income Plan at Rs 943 crore or 17% of AUM and Franklin India Income Opportunities Fund at Rs 497 crore or 29% of AUM continue to trickle down, but they are not cash positive yet. In fact, the absolute borrowing amount for both the schemes has remained constant since October 29. Each scheme can return monies to investors only after paying all the obligations/ liabilities towards borrowings/ expenses/provisions.

According to Franklin Templeton MF, post the judgement of the Hon’ble High Court of Karnataka, the AMC has considered all possible options over the last few weeks to start returning money to unitholders “in the shortest possible time in an orderly manner”. This included the option of seeking unitholder consent according to the judgment of the Hon’ble High Court. However, after detailed deliberations, the fund-house determined that it will be necessary to seek judicial intervention from the Hon’ble Supreme Court to ensure an appropriate implementation of the law in the best interest of unitholders. 

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