Franklin Templeton | By when can investors expect their money back?

A good measure of when investors can receive their money back is by analysing the liquidity profile of the underlying assets in the 6 affected schemes. A liquidity profile is a measure of the maturity timelines of these assets. Assuming that all maturities and payments are honoured, here is a realistic timeline of how each scheme will repay the money.

April 27, 2020 / 10:24 AM IST

If you are an investor in any of the six debt schemes wound up by Franklin Templeton (FT), you are probably trying to figure out when you can expect your money back.

How Will I Get The Money Back?

There are two ways of doing this:

1. They will also continue to explore opportunities to sell assets through the secondary market once the current environment stabilises.

2. Regular payments when underlying assets reach maturity or receive coupon payments or are pre-paid.

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In the first instance, it is anybody’s guess when the market will stabilise and when the secondary market transactions will restart. But, it’s the second method that can provide some sense of timelines regarding recovery.

When Will I Get My Money Back?

A good measure of when investors can receive their money back is by analysing the liquidity profile of the underlying assets in the 6 affected schemes. A liquidity profile is a measure of the maturity timelines of these assets. Assuming that all maturities and payments are honoured, here is a realistic timeline of how each scheme will repay the money.

Imp disclaimer: Do remember, this calculation does not account for any secondary market transactions. If FT decides to sell some/any security in the secondary market, it is likely that it may fetch a different value and will subsequently alter the timelines too.

Imp disclaimer: If any underlying security is downgraded prior to its maturity, its valuation may be altered affecting the prospect of the full amount being returned.

Imp disclaimer: In all likelihood, FT will not prolong the recovery till the full maturity duration. Experts say most securities are likely to be disposed off in the secondary market within 1-2 years.​

Franklin India Credit Risk Fund

This fund expects a total of Rs 4,434 crore over a period of a little over 7 years. Off this, about 15 percent (Rs 687 crore) can be expected within the next 6 months. The bulk of the repayments (Rs 1,739 crore) are seen returning between a period of 2-3.5 years.

However, this fund also has a negative cash balance of Rs 467 crore which amounts to 10.52 percent. As specified by FT, all liabilities of the scheme have to be discharged before investors can be returned their money. So, it is safe to assume that over 50 percent of the Rs 687 crore expected in the first 6 months will flow towards repayment to lenders.

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Franklin India Dynamic Accrual Fund

This fund expects a total of Rs 3,119 crore over a period of a little over 7 years. Off this, a basic 10 percent (Rs 294 crore) can be expected within the next 6 months. The bulk of the repayments (Nearly Rs 1,200 crore) are seen returning between a period of 2-3.5 years. This fund has positive cash balance of Rs 54 crore (1.72 percent), so that too should be expected to flow to investors barring some minor liability which is to be settled.

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Franklin India Income Opportunities Fund

This fund expects a total of Rs 2,506 crore over a period of a little over 7 years. Off this, almost nothing is due for repayment in the first 1.5 years. The first substantial maturities begin only after 1.5 years. Bulk of the repayments (Rs 778 crore) are seen returning between a period of 1.5-3.5 years. However, this fund also has a negative cash balance of Rs 153 crore which amounts to 6 percent. As specified by FT, all liabilities of the scheme have to be discharged before investors can be returned their money, so that should likely delay the first realistic repayment to only the second year.

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Franklin India Low Duration Fund

This fund expects a total of Rs 2,737 crore over a period of a little over 7 years but the bulk should be settled much before that. Over 30 percent of the money (Rs 1,152 crore) is likely to return within the first year itself. Another almost 30 percent (Rs 827 crore) is expected in the next 1 year. So, investors are likely to collect nearly 60 percent of their monies within 2 years. However, this fund also has a negative cash balance of Rs 347 crore which amounts to nearly 13 percent of the total. As specified by FT, all liabilities of the scheme have to be discharged before investors can be returned their money, so that should likely diminsh the returns in the first year.

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Franklin India Short Term Income Plan

This fund expects a total of Rs 7,039 crore over a period of a little over 7 years and the repayments could well be staggered pretty equally over that period. Roughly 15 percent of the money (Approx Rs 1,300 crore) is likely to return within the first 1.5 years. Over 30 percent (Rs 2,516 crore) is expected in the next 1 year post that. Larger payments can also be expected in the time frame of 4.5-5 years. However, this fund also has a negative cash balance of Rs 1,222 crore which amounts to 17 percent of the total. As specified by FT, all liabilities of the scheme have to be discharged before investors can be returned their money, so that should likely delay the first realistic return to only after 1.5 years.

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Franklin India Ultra Short Bond Fund (Super Inst)

This fund expects a total of Rs 10,964 crore over a period of a little over 7 years and the repayments are well stacked in the early years. Over 30 percent (Rs 3,457 crore ) is expected in the first 6 months and over 55 percent (almost Rs 6,000 crore) can be seen in the next 2 years. So, a total of 75 percent (nearly Rs 9,500 crore) should flow to investors with the first 2.5 years itself.

However, this fund also has a negative cash balance of Rs 722 crore which amounts to 7 percent of the total. As specified by FT, all liabilities of the scheme have to be discharged before investors can be returned their money, so that should likely diminish the returns of the first 6 months by an equal amount.

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Sumaira Abidi
first published: Apr 27, 2020 09:40 am

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