Investors in Franklin Templeton’s mutual fund schemes that were abruptly shut down last year will get ₹9,122 crore, or more than a third of their investments, after the Supreme Court ordered the disbursal of monies within 20 days.
Five out of the six schemes collectively held ₹9,770 crore as of 29 January, the money that had accrued from interest and principal payments. The apex court has tasked SBI Mutual Fund with supervising the disbursal.
“We went ahead with the difficult decision of winding up these schemes because of our firm belief that this was the right decision to preserve value for investors, as evidenced by the generation of cash in these schemes over the last 9 months. We believe the distribution of monies will provide unitholders with much-needed liquidity and look forward to working with the regulator and SBI Mutual Fund to distribute the cash within the period stipulated by the court,” said a spokesperson for Franklin Templeton Mutual Fund.
About ₹26,000 crore was invested in the six fixed-income funds in April last year, when the Indian unit of Franklin Templeton froze investor withdrawals because of a liquidity crisis in the bonds market that was triggered by the lockdown.
Unitholders will be paid in proportion to their investment, the SC directed. Investors in schemes with higher cash levels will get more.
One of the six schemes, Franklin India Income Opportunities Fund, still has to repay dues; so, its investors will receive payments after the borrowings are fully repaid.
The SC has fixed the next hearing of the matter after three weeks and allowed all parties to seek clarifications from the court regarding the distribution of funds.
Around 300,000 investors of the six affected funds will benefit from the order. Some of the large investors in the schemes had earlier challenged Franklin Templeton’s decision to wind up the schemes without the consent of unitholders.
The Karnataka high court in October declined to interfere with the winding-up decision but ordered that unitholders must have a say in the decision. Franklin Templeton, however, challenged the high court order before the SC.
In December, Franklin unitholders, however, overwhelmingly voted in favour of winding up the six schemes.
Last week, the SC said it would examine the Securities and Exchange Board of India’s regulations governing winding up after determining the procedure to distribute the money to the unitholders of the six wound-up schemes. At that time, Franklin Templeton told the court that five of these six schemes were now cash positive, with the cash available for disbursement at over ₹9,000 crore as of 15 January.