Franklin Templeton Mutual Fund informed investors that Essel Infraprojects Ltd., an Essel Group company, defaulted on the final repayment on two zero-coupon bonds held by four of the six schemes that the asset manager wound up last month citing liquidity issues.
The repayment for the bonds—0% Essel Infra Series I and 0% Essel Infra Series II—was due on Friday, the asset manager said in a statement. They are backed by a pledge on listed shares of Zee Entertainment Enterprises Ltd., Dish TV India Ltd., unlisted shares of Essel Infraprojects Ltd., personal guarantee of Essel Group Chairman Subhash Chandra and corporate guarantees.
Franklin Templeton, unlike some of its peers, did not sell the publicly listed shares that were available as a collateral against the bonds. The bonds were marked down to Rs 92 crore, which is 15 percent of their maturity . The default does not change the net asset per unit of the four schemes that currently hold the bonds, the asset manager said.
“This only reflects the realisable basis the current share cover and does not indicate any reduction or write-off of the amount repayable by EIL (Essel Infraprojects),” said Franklin Templeton. “The valuation would be monitored daily and the receivable will be adjusted to reflect any material change in the share cover.”
The fund house said it has appointed legal counsel and was actively considering all necessary steps to maximise recovery .
The two bonds account for 0.16 to 1.87 percent of the assets under management of the four schemes, all of which are part of the six that were wound up by Franklin Templeton on March 24. They are:
- Franklin India Short Term Income Plan
- Franklin India Dynamic Accrual Fund
- Franklin India Low Duration Fund
- Franklin India Credit Risk Fund
The defaults for Franklin Templeton come when the market regulator has asked the asset manager to focus on repaying investors of the wound-up schemes at the earliest.
A query sent to the spokesperson of the Essel Group on the status of the repayment on the two bonds has not yet been answered.