Majority Of Unitholders Vote To Wind Down Franklin Templeton’s Six Fixed Income Schemes

Franklin Templeton Mutual Fund said a majority of the unitholders in its six frozen fixed-income schemes have voted in favour of an orderly winding-down.

“We are thankful to our unitholders for voting overwhelmingly in favour of the orderly winding up in all six schemes,” Franklin Templeton said in response to a query from BloombergQuint. The asset manager hopes to commence distribution of investment proceeds at the earliest, subject to the directions of the Supreme Court in the next hearing scheduled on Jan. 25, it said.

Earlier in the day, CNBC-TV18 reported that more than 90% of the unitholders in the six schemes voted in favour of winding up in the e-voting that took place between Dec. 26 and Dec. 29. The vote in favour effectively means that the mutual fund can control the winding-up process of the six fixed income funds with assets under management of just under Rs 25,900 crore.

If the majority of unitholders had voted against winding up, the schemes would have been re-opened and investors would have been free to sell their units.

The Supreme Court had in December directed Franklin Templeton to seek unitholder approval for the winding down process. The results of the voting, the court said, would need to be submitted by an external observer to the court in a sealed envelope.

After the apex court's Jan. 25 hearing, another vote will be needed to ascertain who will carry out the liquidation process. Unitholders will have to decide whether Kotak Mahindra Bank Ltd. will advise the trustees on the process, or if Deloitte Touche Tohmatsu India LLP will spearhead the process, assisted by the asset management company, which would be advised by Kotak Mahindra Bank.

“I think it was sensible of the investors to have voted for winding up,” said Kirtan Shah, chief financial planner at Sykes & Ray Equity. “It also goes to show that a small group of investors had been holding up the process.”

Franklin Templeton, unable to meet redemption pressure in its six fixed income funds, had in April last year decided to wind them up. Payments to unitholders had been put on hold after the matter was heard, first by the Karnataka High Court and later by the Supreme Court.

In the interim, Franklin Templeton has had cash inflows of Rs 13,789 crore between Apr. 24 and Jan.15. As of last week, according to the mutual fund's latest update, five of the funds were cash positive and had Rs 9,190 crore available for transfer to unitholders.