As Franklin Templeton begins repayment, debt fund investors can breathe easy

Investors in the suspended debt schemes of Franklin Templeton can heave a sigh of relief with SBI Funds Management starting to credit the surplus cash of ₹9,122 crore in investors bank account on Tuesday.

As per the Supreme Court judgment, SBI Funds Management has started the process of repaying about 3 lakh investors in the five of the six debt schemes that have turned cash positive.

The entire repayment is expected to be completed in two-three days as 30,000 payments are made in one batch and about 3-5 batches are processed in a day, sources said.

Investors who have not received the amount first need to check and update their KYC and should approach the fund house, if the amount is not credited in three days, the sources added.

Post-payment, the fund house will extinguish equivalent units from the investors account while retaining their units in the segregated account. Confirming receipt of money, NS Raghavan, an investor in Franklin India Ultra Short Bond Fund, said better sense has prevailed at last given the kind of anxiety undergone in last nine months and hope more money is paid by selling of the remaining investments of the scheme in a time bound manner.

Segregated Portfolio

Investors holding units in segregated portfolio in suspended debt funds will not receive any payment now.

The debt funds had invested ₹2,100 crore in Vodafone Idea and another ₹510 crore in Yes Bank AT1 (additional tier-I) bonds. These investments were spun off as segregated portfolio after they default on their coupon payment last year.

So far, the fund house has received ₹1,250 crore including a coupon of ₹100 crore from Vodafone Idea.

Franklin India Low Duration Fund, Short Term Income Plan, Income Opportunities, Credit Risk Fund and Dynamic Accrual Fund hold side-pocket units of Vodafone Idea security.

The fund house investments in Vodafone Idea matures on September 2, 2023.

However, Franklin Templeton can exercise a ‘put’ option that is due to come up on September 3, 2021. A ‘put’ option gives the right to bondholders to enforce repayment of the principal amount before maturity.