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Franklin Templeton Mutual Fund is expecting to receive a total of Rs 6,000 crore until September-end in the six debt schemes that were wound up on April 23, 2020 said Santosh Kamath, Managing Director & Chief Investment Officer-Fixed Income in podcast sent to investors and distributors.
Giving the break up of Rs 6,000 crore, Kamath said that six schemes received cash flows of Rs 3,275 crore from April 24-June 30, 2020 without doing any secondary market sale.
“The schemes would potentially receive an additional Rs 3,200 crore from July 1-Sep 30, 2020. This will take the total over Rs 6,000 crore from April 24 to Sep 30,” Kamath said.
On April 23, Franklin Templeton Mutual Fund had said it would wind up six schemes – Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund and Franklin India Income Opportunities Fund – citing severe illiquidity and redemption pressures caused by the COVID-19 pandemic.
A podcast with Kamath highlighted on the thought process behind his investment decisions and monetising the investments.
Kamath said, “In order to sell efficiently in the secondary market government securities, or AAA paper curve should be at a lower level, liquidity in the market should be good, it should be easy for corporates to access money from the banking system and market should see a normalised risk appetite.”
Giving rationale on Franklin Templeton MF being the only subscriber to bond issues of certain companies , he said Vastu Home Finance where the fund house was the predominant holder was upgraded recently in a difficult market environment showing strength of the company.
Kamath said, “We also had investments invested in AU Finance, Equitas Finance, Tata Sky, Mahindra World City, when we were among the only investor in those companies then and it turned out quite well for the schemes. AU Finance – a small NBFC turned into itself into a bank. Equitas –same story, a small NBFC turned into itself into a bank. Tata Sky got upgraded and many investors started buying those paper and therefore spreads came down and that’s true for Mahindra City and many such names.”
Concluding the podcast, Kamath said that 2 schemes – Franklin India Ultra Short Bond Fund and Franklin India Dynamic Accrual Fund – which have paid up all their borrowings and are cash positive.
In fact, Franklin India Ultra Short Bond Fund has 13 percent of its AUM in cash as of June 30th.
Other two schemes—Franklin India Credit Risk Fund and Franklin India Low Duration Fund, the borrowing level has come down to sub 10 percent from their original levels on April 24,2020.