The wound-up debt schemes of Franklin Templeton Mutual Fund (FT MF) witnessed a default from the Future group firm -- Rivaaz Trade Ventures (RTVL) -- on Monday. Following this, the exposure to the non-convertible debentures (NCDs) of the company were re-priced to zero.

Many schemes face the pinch

Four of the six schemes that are being wound up had 0.3 percent to 6.3 percent exposure to the securities of the firm. These include Franklin India Credit Risk Fund-FICRF (0.33 percent of scheme exposure), Franklin India Dynamic Accrual Fund-FIDA (3.02 percent), Franklin India Short Term Income Plan (5.02 percent) and Franklin India Income Opportunities Fund (6.32 percent).

Earlier this year, these four schemes had to re-value exposure to Nufuture Digital and Future Ideas Company (other Future group firms) to zero, following defaults on their debt obligations.

The latest round of re-pricing would have a further impact on the net asset values (NAVs) of the schemes, but the fund house in its communication has offered comfort to investors.

Citing the announcement of Reliance Retail acquiring the retail & wholesale business and logistics & warehousing operations of Future group, the fund house said representations from the Future group suggest that NCDs are proposed to be repaid from the proceeds of this transaction.

Last month, Reliance Retail, a subsidiary of Reliance Industries, announced the acquisition of the above businesses of Future group on a going-concern basis, for a consideration of Rs 24,713 crore.

“We believe the proposed sale announcement is positive development for the NCDs held by schemes of FT MF. We are closely tracking developments around the same,” the fund house said in the investor communication.

Since the announcement of the winding up of the six debt schemes, these funds have received cash amounting to Rs 6,072 crore from maturities, pre-payments and coupon payments.

As of August 17, four schemes – FICRF, FIDA, Franklin India Low Duration Fund (FILDF) and Franklin India Ultra Short Bond Fund (FIUBF) – had turned cash positive.

However, investors in these schemes await receipts from these funds, with courts hearing the case pertaining to the winding up of FT MF schemes, and the e-voting by unit holders being put on the back-burner.

-by Jash Kriplani