Mutual funds. Franklin Templeton owes ₹39,085 cr, claim investors

A day after market regulator SEBI pronounced Franklin Templeton Asset Management Company (FT AMC) guilty of mismanagement and misconduct, a clutch of investors told BusinessLine that they would press to recover their full money. FT AMC owes nearly $5 billion or ₹39,085 crore to more than 3 lakh investors of its six debt schemes that were abruptly shut in April 2020, leading litigants told BusinessLine .

“Our claim of ₹33,953 crore (gross) has already been submitted to SEBI. We are planning to move SAT for the same. We have submitted documents, part of FT AMC’s regulatory filings, that show the amount of segregated portfolio and repayments of borrowings. Nothing of this is outside FT AMC’s own admission. The 15 per cent interest is as per mutual fund norms. We will press for this entire money. The SEBI order has detailed all the dubious management practices that were going on in FT AMC and now it’s only logical that we get our full claim even after selling the assets of FT AMC,” said Anuj Maheshwari, partner Kaj Associates LLP, one of the petitioners in the Supreme Court.

The amount comprises principal or gross assets of the debt schemes worth ₹33,953 crore and an interest on the major portion of that for 13 months so far (since the time schemes were shut) at ₹4,809 crore.

In this ₹39,085 crore, around ₹25,141 crore is the principal that FT AMC owes based on the last net asset value (NAV) of the six debt schemes on April 23, 2020. Investors say, FT AMC allowed some investors including its own officials to redeem their investments up to the last day before shutting the schemes. Since these were open ended schemes, redemptions in them cannot be suspended abruptly. Hence, investors say it is that day’s NAV that they should consider to return the principal. Investors, who are original litigants in the Supreme Court against FT AMC, had submitted their claim in a legal notice to SEBI. The documents are in possession of BusinessLine .

In addition to the principal amount, FT AMC also owes ₹4,475 crore to investors that it took out from the debt schemes for repayment of borrowings. Also, ₹3,087 crore was side-pocketed or put in the segregated portfolio of the six debt schemes by FT AMC. Together this amount comes to ₹33,953 crore and investors are claiming an interest of 15 per cent on it according to section 53 of SEBI’s Mutual Fund Regulations. The regulations say, “In the event of failure to dispatch the redemption or repurchase proceeds within the period specified (one month), the AMC shall be liable to pay interest to the unit holders at such rate as may be specified by the Board for the period of such delay.”

The Karnataka High Court, in its order, had clearly restricted FT AMC from repayment of borrowings, Maheshwari said.

“So far, there is no legal winding-up of schemes. SEBI’s dire observations in its order make the whole FT AMC business dubious,” said Anil Jain, another investor litigating the case in SC.

“We have told the SC that the total dues of FT AMC are to the tune of over ₹33,000 crore; and in addition to interest, it needs to revalue the securities it had devalued. The hearing on this will be done now,” said Puneet Jain, a Supreme Court advocate.

FT AMC says that its schemes had distributed ₹17,777 crore as on June 4, 2021. FT AMC did not respond to an e-mail query on Wednesday about its total liability and investor claims. It has declared that it would be approaching SAT against SEBI order. Investigations have revealed that highly rated securities were devalued drastically, some even driven down to near zero. SEBI has charged FT AMC with not valuing the securities as per regulations. Also, FT AMC invested in illiquid securities and made incorrect disclosures of its portfolio.