The trustee of Franklin Templeton Mutual Fund in India has approached unit-holders to seek their consent for the orderly winding up of the six debt schemes, as directed by the interim order of the Supreme Court.
The trustee has partnered K Fintech for the electronic voting process and a meeting of unit-holders to seek their consent. Voting will take place during December 26-28 and the meeting of unit-holders of the schemes on December 29.
The fund house is seeking ‘simple majority’ consent of unit-holders for each of the six scheme separately. The trustee believes unit-holders will benefit by voting for the proposed resolution.
The trustee feels an orderly liquidation will maximise the value of portfolio assets for distribution of cash to unit-holders on a
If the decision to wind up the schemes in an orderly manner is not implemented, it would precipitate a rush for redemption, which would force a distress sale of the portfolio securities, leading to substantial losses for unit-holders.
Once voted ‘Yes’, the trustee will proceed with the next step to seek approval from unit-holders for the appointment of a person to carry out the winding up.
Sanjay Sapre, President, Franklin Templeton – India, said the orderly winding up will allow the fund house to maximise the return of investment value without resorting to an emergency liquidation of securities.
The opportunity to liquidate assets at fair value will increase with time in a normal market environment. An orderly winding up does not mean a lengthy wait for return of monies, he said.
Addressing concerns on the quality of the portfolio and the schemes’ ability to monetise assets, Santosh Kamath, CIO, Franklin Templeton Fixed Income India, said that of the ₹11,576 crore received since April 24, nearly half was from securities rated ‘A’, followed by those rated ‘AA’. Many of these securities were unlisted, and in many instances, Franklin Templeton schemes were majority investors, he said.
Sapre said many issuers are approaching the fund house with offer of prepayment and with markets slowly returning to normal, secondary market interest for many of the securities held in the scheme portfolios is also increasing.
“We believe that monetising a large amount of portfolio assets over a period of time in an orderly manner will result in better outcomes for unit-holders, as compared to being forced to sell the same securities as a ‘distress sale’ in a short period of time,” he added.