Franklin India Says Investors May Lose Money if Plan Spurned

(Bloomberg) -- Franklin Templeton Asset Management (India) Pvt. warned investors of potential losses if they vote against its plan to wind up more than $4 billion of debt funds it froze earlier this year.

Electronic voting will take place Dec. 26 to 28 on the asset manager’s plan, according to a statement from the company Monday.

Franklin is seeking a simple-majority consent of unitholders on its proposal to wind up six plans it had shuttered in April, which locked in 308 billion rupees ($4.2 billion) in the biggest forced fund closure ever in India.

The country’s top court asked the asset manager on Dec. 3 to initiate steps to meet unit holders in a week, as it agreed to hear Franklin’s appeal against a lower court verdict that had blocked winding up the debt funds without investor consent.

Read more about the Supreme Court move here

If the investors vote down the resolution, the shut funds “would be required to reopen immediately and may need an emergency liquidation of securities, if a high volume of redemption is received,” Franklin said in the statement. “This may entail distress sales of securities in order to meet the redemptions received.”

The Supreme Court is scheduled to hear the case next on Dec. 9, and has asked Franklin to give an update then about its steps to get unitholder approval.

Market participants are closely tracking the case, where even the markets regulator Securities & Exchange Board of India earlier faced a court’s ire. In October, the lower court said in its orders that Sebi failed to protect investors’ interest and remained a “silent spectator.”

The top court will also take up an appeal by Sebi against that order.

©2020 Bloomberg L.P.