Here’s What Investors Of Six Schemes Frozen By Franklin Templeton Have To Choose From

Looking to repay unitholders of six debt schemes it wound up, Franklin Templeton Mutual Fund has offered investors two options: either let its trustee monetise assets or hire a third party to conduct the process.

The choice is between Deloitte Touche Tohmatsu LLP, a liquidation and restructuring firm, and the trustee appointed by the asset manager, according to a notice by Franklin Templeton.

Unitholders will have to select their option through e-voting from June 9 to 11. This is mandated under regulation 41 of SEBI (Mutual Fund) Regulations 1996, which requires approval of unitholders for winding up a scheme. Franklin Templeton Mutual Fund froze six credit-risk schemes with Rs 28,000 crore in assets citing redemption pressure in April.

How E-Voting Will Work

Investors of the six schemes will have the three-day window, according to the process disclosed by Franklin Templeton. Each unitholder of a scheme will be entitled to vote only once through SMS or email sent by the mutual fund. On June 12, the mutual fund will hold a meeting of all unitholder via videoconference.

Unitholders can either allow or reject the plan put forward by Franklin Templeton to monetise assets.

If rejected, then a trustee appointed by Franklin Templeton will be required to propose other options. That, however, will delay sale of investments and distribution of proceeds.

If unitholders vote ‘Yes’, they will have to choose from two options:

• Either let the trustee appointed by Franklin Templeton, along with its assistance, to monetise assets.
• Or authorise Deloitte, a liquidation and restructuring firm, to conduct the process.

In both the options, Kotak Mahindra Bank will be the adviser.

Deloitte’s and Kotak’s expenses will be borne by Franklin Templeton, which won’t charge any investment management and consultancy fees on the schemes.

What To Choose?

While there is little choice for investors, the first option of trustee named by Franklin Templeton and Kotak Mahindra Bank conducted the process to monetise assets, said Kirtan Shah, founder, Ambition Learning Solutions.

Agreeing, Sunil Jhaveri, founder, MSJ MisterBond Pvt., said trustees appointed by the mutual fund would be preferable since they will be more sensitive to the needs of the investors and will be more careful as Franklin Templeton’s name is at stake. Investors shouldn’t delay the process, he said.

Most of the negatives have already been factored in and that's why the yield-to-maturity of most of these schemes is around 12-18% per annum, Jhaveri said. “Even if haircuts were to happen on some of the papers held by the schemes, there will be enough cushion to absorb them due to these higher YTMs,” he said, advising investors to consider them as fixed maturity plans where they will be repaid over a period of time.

(Corrects an earlier version that misstated Kirtan Shah is with Skyes & Rays Equities.)